The Pros and Cons of Health Care Reform (ACA)

1-No More Denials for Pre-existing Conditions

For many years everyone that applied for health insurance in the Individual or Family market needed to complete an application to pass or be approved by underwriting guidelines. This caused major frustration for many people who were declined or had their premiums rated-up or increased to compensate the insurers for the risk (price) to cover these people. Under the Affordable Care Act, as of January 1, 2014, health insurance providers will no longer be able to deny health insurance coverage or charge higher premiums to individuals with pre-existing health conditions. People who previously were unable to obtain medical insurance due to their medical history, often referred to as pre-existing conditions, will be able to acquire coverage without any health underwriting.

2-Low-Middle Income Individuals and Families and Subsidies

Medicaid will be expanded to cover more people in the lowest income brackets. People with lower incomes will qualify for subsidies from the government, which will cover up to 100% of their monthly premiums. Subsidies are available up to 400% of the Federal Poverty Level. Although determined by a sliding scale based on income, a California Family of 4 will be eligible for a subsidy with income approaching 90k per year. Subsidies are determined based on annual income and number of dependents in the family.

3-Higher Premiums and Higher Income Individuals and Young People Will Pay More

Health Care Reform promises coverage for all, but increased affordability for all is not guaranteed. The addition of those with pre-existing conditions to the pool of covered members will cause premiums to increase. Those considered affluent based on national standards will not qualify for government subsidies and will have to pay extra as premiums rise. The standards for income levels are set nationally, so individuals from states like California with higher average incomes will have fewer people qualifying for government subsidies.

Young adults are likely to be the most effective by higher premiums. The Affordable Care Act requires that premiums for those in their 60’s be no more than three times the amount of those in their 20’s. Previously the ratio was 6-1. This is not expected to decrease premiums for those in their 60’s but rather to increase premiums for younger people. In California rates are forecasted to increase by up to 50% in 2014 for younger people to (1) comply with the 3-1 ratio (2) they may need to select a new plan – plans that do not comply with ACA required benefit levels will be eliminated and (3) to cover the expected high costs of the newly insured (the healthy pay for the sick). Those in their 20’s may be able to purchase a qualified major medical plan at a lower premium rate. This major medical plan would not be subject to the same essential benefits requirements as the other Health Care Reform plans, which would allow carriers to offer these plans at lower rates. Young people in their 20’s will be the only ones allowed to enroll in these plans, they will still be considered to have met the mandate, and they will be able to avoid the penalty.

With the mandated benefits levels from the metal plans many people will be forced off their catastrophic (high deductible) plans and forced to a plan that complies with the mandates. This will certainly represent higher premiums. Additionally, with the 3-5 million Californians expected to purchase insurance through the California Insurance Exchange (many were without insurance or were un-insurable) there is expected to be a significant rise in claims in the first few years. The future of the California Insurance Exchange is debatable and depends upon whether the benefits and legislation are sustainable.

4-Potential Doctor Shortages

The Federal government is expanding the Medicaid network to accommodate the millions newly insured through the California Insurance Exchange. Many doctors have seen their payments by the insurance carriers and Medicare and Medicaid reduced. With millions of new insured expected and fewer and fewer doctors accepting the Medicaid reimbursement rates, doctor shortages are expected.

5-Approvals for Services

In order to control costs, there will be some level of approval required by the Federal government. Do we anticipate “death panels”? No. However, we do expect that the state Insurance Exchanges have under-estimated the cost to insure and cover the millions of people expected to participate. In order to control cost there will be approvals and “controls” implemented, similar to an HMO. Services, both corrective and elective, may be declined.