It’s been almost three years since the ACA was signed into law, and in that time, the implementation process has been both steady and plagued with difficulties. The major provisions of the law have largely adhered to the original scheduled time frames, but there have been numerous hiccups along the way, culminating last summer in a Supreme Court case that challenged the legality of several aspects of the law. Once SCOTUS ruled in favor of the ACA, the path was largely cleared for implementation of the health insurance exchanges (marketplaces) that are scheduled to be open for business this fall with policies effective next January. The individual mandate will also take effect in January, but the penalty for not having health insurance in 2014 will be very small ($95 per uninsured person, or 1% of taxable household income). This has caused some concern that the mandate might not be strong enough to avoid the looming problem of adverse selection: specifically, that people who are in need of healthcare might be much more likely to purchase health insurance than people who are currently healthy once all plans are guaranteed issue.
Last month I wrote an article about how the ACA will largely erase the differences that currently exist between the small group and the individual health insurance markets. Once that happens, it would be odd to expect to not see a corresponding change reflected in the premiums. I think it’s unlikely that the premiums will equalize via a drop in small group premiums (if anything, the requirement that small group plan deductibles not exceed $2000 might mean that the average small group premiums increase too). The individual market is poised to become more like the small group market once the policies become guaranteed issue, and the premiums in the small group market are currently significantly higher than the premiums in the individual market. There will likely be a price decrease for people at the upper end of the age spectrum in the individual market, since their premiums are going to be limited to a maximum of 3 times the premiums for young people. But there is a growing concern that those young people – and probably a lot of people in the middle too – might be in for some sticker shock.
Yes, the subsidies will help cushion the blow for people earning less than 400% of federal poverty level. But that still leaves a lot of people facing higher premiums and no subsidies. People who aren’t poor but definitely aren’t wealthy either – in other words, people who are middle class. Some of them are probably quite healthy. Some of them might have money stashed away in HSAs in order to pay for unexpected medical bills. Some of them might be happy to opt for higher deductibles and “catastrophic” health insurance plans in trade for lower premiums. But the way the ACA is currently written, they won’t be allowed to do that. The “catastrophic” plans will only be available to people under the age of 30 or people who meet the economic hardship qualifications. Everyone else will have to have at least a “bronze” plan that provides a broad range of benefits mandated by the ACA.
Please don’t misunderstand me here. I firmly believe that our healthcare system needed to be reformed, and I’m glad that people with pre-existing conditions will have more health insurance options starting next year. But I do find it a bit disconcerting that some of the existing options will be taken away, especially since those options might appeal to the very segment of the market that might be facing significantly higher premiums next year. Self-employed people (ie, no option for employer-sponsored health insurance) who earn roughly 400% of FPL (about $46,000 for a single person or $94,000 for a family of four) or slightly higher, will qualify for little or no subsidies but might be facing significantly higher health insurance premiums next year. And yet, a “catastrophic” health insurance plan will be unavailable to them if they are over 30, even if that’s the plan they would prefer to buy. Even if they have money set aside in an HSA or other savings account to cover the higher out-of-pocket costs. In order to offer a bit more flexibility and premium relief for families that qualify for little or no subsidies, I’d like to see more lower-cost/higher out-of-pocket health insurance options available both in and out of the exchanges/marketplaces next year. I can understand the motivation behind the minimum coverage requirements: mainly that we don’t want people to be caught high and dry with health insurance that is full of holes, and we want to avoid pseudo-insurance plans like mini-meds as much as possible. But as long as a policy has solid coverage after the deductible, I see no problem with allowing plans that have higher deductibles and lower premiums.
I don’t think we’ve heard the end of the worries about premiums. I expect that this will become more of an issue as the year goes on and the marketplaces get ready to start enrolling people in the fall. We won’t know what the 2014 premiums are going to look like until this fall, but I’m sure I’m not alone in hoping that the rules are relaxed a bit to allow people to self-insure a larger share of their health care expenses via higher deductible plans, if they choose to do so. At the very least, the “catastrophic” plan option should be available to anyone, regardless of age.
