Healthcare Reform School - Lesson #9 - Will my insurance premiums change in 2014?

Welcome back students.  I hope you are all learning something from these lessons.  Based on my conversations every day with many people in the market for health insurance, you are ahead of the curve on education just by reading the 8 lessons I have posted so far.  If you have not read them all then there is a review at the end of this blog for you.  Please share this blog with any of your acquaintances that care about big topics like Healthcare Reform and the Affordable Care Act (ACA).

So today I will give some insight to the question "will my health insurance premiums change in 2014" undder Obamacare.  The short answer is YES.  In the long answer I will break it down based on your age bracket, income bracket and where the insurance marketplace of which you are a member.

First I will break it down by age and in the private market place.  I will not cover people in large employer sponsored group plans.  That will be the next blog, so keep an eye out for that if you are a member of that marketplace.

• A great tool for anyone to use to determine what their rates might be in 2014 is the rate calculator.  It will ask for ages of individuals to be insured, income level and zip code.  Then it will give expected rate for 2014.  This tool will also give any subsidy amount that to expect in 2014.  What an awesome tool this is to help prepare for the affordable care act.

  

  Image courtesy of Piyachok Thawornmat http://www.freedigitalphotos.net
  

• People in the youngest age group, under 26, are allowed to stay on their parents plan, and assuming the parent are paying for it, then this is the only free insurance out their and it will not increase
• However the youngest people buying their own insurance, under the age of 30, will be impacted the most by premium increases.  There have been some articles I have read that premiums will increase as much as 116% for this age bracket in major metropolitan areas.
• If you are a smoker, now is a good time to quit, (duh) because smoking is the only rate up that will be legal under the ACA.  What I mean by this is that a client can have cancer and be in treatment, but can not be charged a higher premium than their healthy neighbor of the same age.  In contrast, if the neighbor smokes, that person can be charged up to 50% more for their health insurance premiums.
• The middle age groups will be affected by premium increases also.  However since the older groups pay higher premiums already, they will be affected less each decade of increase.  For example, a 51 year old will experience a less dramatic increase then a 41 year old.
• After the age of 60 the premiums will stay the same or possibly be reduced, depending on the type of insurance currently owned by the individual.  If a 61 year old currently has a high deductible plan designed to keep premiums lower, unless they prepare now and lock in a low premium policy, than their premiums will increase significantly also.
• There will be subsidies available for many Americans.  This will be based on income and will be a topic for another blog.  But use this Rate Calculator to determine eligibility for subsidies.

Many people wander why the premiums will increase.  There are many reasons why.  I will list just a few of the more impactful reasons:

• Many sick people that are currently uninsurable are expected to enter the purchase insurance and start filing claims immediately, driving up the cost to insurance companies, who then must raise premiums to pay for these claims.
• The insurance companies will are required to change their rating calculator for older clients -vs- younger clients.  What this means is that currently an insurer can charge up to 5 time more for a client in their 60's than for a client in their 20's.  Under the ACA, insurers are restricted 3x factor on premiums based on age.  Which means they will only be able to charge 3 times more for that same person.  The practical effect this provision of the law will have is to keep the premiums on the older group relatively stable while increasing the premiums on the younger group.
• Minimal Out of Pocket expenses, lower deductible, and essential health benefits are other main factors in increasing premiums.  Currently to keep premiums low people have options such as choosing a higher deductible, and pulling out coverages such as maternity and mental health.  Under the new law, these options will no longer be available, the government is not only telling citizens they need to purchase insurance, but they are putting requirements and what type of insurance to purchase.  The requirement is to have low deductible insurance and all of the essential health benefits will be added to policies regardless of need.  This increase premiums significantly.
• The multiplier that insurers can use to figure premiums differences between young clients and older clients is being changed.  A provision in the ACA restricts this age multiplier.  Currently a insured person in their 60's can be charged up to 5 x more than a client in their 20'.  This multiplier will change to  a factor of 3X in 2014. The practical effect of this provision is the keep the premiums on the older group relatively stable while raising the premiums on the younger group.

 So there it is, yes your premiums will be affected.  My advice is to prepare for the future by planning now.  If you would like some help, contact me at 773-972-5343 or respond to this blog.  The only dumb question is the one that is not asked.

As promised below are the links to my previous blog posts for your continuing education.
 Lesson #1 - Introduction
Lesson #2 - Basic Reason for creating the Patient Protection and Affordable Care Act
Lesson #3 - Public exchanges for Purchasing Insurance
Lesson #4 - Essential Health Benefits that will be added to all Health Insurance policies in 2014
Lesson #5 - Tax Credits to Help Pay for Health Insurance
Lesson #6 - Enforcement and Penalties in the Affordable Care Act
Lesson #7 - Preparing for the Affordable Care Act
Lesson #8 -  Options for Small Businesses