May 31, 2013
As states gear up to create the health insurance exchanges demanded under President Obama’s Affordable Healthcare Act they’re finding out that private policies for individuals aren’t going to be quite as affordable as legislators promised. In fact, in California, individual healthcare premiums will increase by as much as 64-146 percent.
As recently as last week, Peter Lee, executive director of California’s healthcare exchange, said that California’s version of the healthcare exchange would actually reduce premiums. “These rates are way below the worst-case gloom-and-doom scenarios we have heard,” boasted Lee.
But according to Forbes contributor, Avik Roy, Lee was comparing apples to oranges. An increase is inevitable because most of the current individual policies do not meet the mandates set forth by Obamacare.
“He was comparing apples—the plans that Californians buy today for themselves in a robust individual market—and oranges—the highly regulated plans that small employers purchase for their workers as a group. The difference is critical.”
One of the key mandates that will effect premiums once Obamacare kicks in is the requirement that health insurers provide coverage for people with pre-existing medical condition. As Roy explains, “Forcing insurers to cover everyone with pre-existing conditions drives premiums upward. If you know you can buy insurance after you’re sick, you have every incentive to drop out of the system now, and wait until you’re sick to buy insurance.”
Another important mandate is the requirement that requires insurers to work with everyone and restricts their ability to exclude certain doctors and hospitals from their networks. “If insurers have to work with everyone, they lose some of their negotiating leverage with hospitals to keep prices down.”
Increases will vary from state to state based on the individual states’ mandates. For example, some states require all plans to cover acupuncturists and chiropractors. Other force insurers to cover substance abuse treatment and smoking cessation programs. If you have need of these services it’s great because you’re covered under your policy. But if you don’t, then it’s just an additional expense, and, as Avik points out, “it’s another reason for you not to bother buying insurance.”
Under Obamacare, American citizens will have two options for healthcare:
Comprehensive healthcare provided by your employer: Working for a company who provides healthcare coverage might sound like the best solution. However, employer plans must also meet all of Obamacare’s mandates and requirements. Many employers will have to increase their employee coverage and in today’s economy that’s just not possible. They’ll either have to raise the employee’s contribution or decrease their workforce. Either way, it’s the employee who pays.
State’s healthcare exchanges: States are currently creating healthcare exchanges to offer a variety of packages from insurance providers. These packages will meet Obamacare mandates and, at first glance, they look like a real bargain. But unless you’re a 26-year old male who doesn’t smoke or drink and you’ve never visited a doctor in your life, you’re not going to qualify for that $95 package. Providers are using that “pre-existing condition” mandate to their advantage – not yours.
And if your state is one that requires providers to cover everything from hangnails to headaches to hemorrhoids, forget it. Even with any federal subsidies that might be available you’re never going to be able to afford healthcare.
But that doesn’t matter – you’re going to be forced to buy it, whether you like it or not. And if you already have your own private policy, think again. By this Fall, providers will start automatically canceling policies that don’t meet Obamacare minimums.