Private healthcare insurance companies, like Cigna, Aetna, and Well Point, have had to make substantial changes to their coverage eligibility standards due to the ACA’s new federal laws. Their products will be the most likely source of insurance for individuals who make more than 400% of the federal poverty limit and are less than 65 years old. The insurance companies will be required to abide by these new standards, as of January 2014. These changes are so significant that many have said the ACA is insurance reform, not health care reform.
I might be beating a dead horse here, but as I have mentioned before, one of the main goals of the ACA is to drive down the cost of healthcare. Healthcare insurance market reform aims to assist this goal, from the business perspective, by creating more insurance competition (i.e. exchanges, co-ops, a larger customer pool, like the individual mandate) and reorganizing the way insurance companies handle their profits.
With regards to how they handle their profits, 85% of the money that insurance companies receive has to be applied towards healthcare expenses; they can no longer make a 50% profit off of individual’s premiums and keep it. Now, if insurance companies net more than 15%, they have to do something that benefits their enrollees, not themselves.
Insurance reform can raise the cost of insurance premiums dramatically because insurance companies can no longer be selective in who they cover. They must abide by the following requirements when providing new plans to enrollees:
- No one can be denied insurance – preexisting health conditions are no longer a determining factor
- All conditions are covered – individuals are eligible regardless of status-related factors (i.e. health status, medical condition, medical history, disability, etc.)
- Rates are the same across the board EXCEPT…
- self-only or family enrollment premiums will be different
- rating area – there is a provision that specified regions can charge different prices (i.e. suburbia), however everyone in one area will be charged the same regardless of disease
- state specifications
- tobacco use
- There is no cap – as long as the healthcare services are considered essential health benefits
- Preventive services are covered 100% by insurance companies
The fines for not purchasing healthcare insurance by January 2014 are not astronomical…yet. Healthy individuals tend to not purchase healthcare insurance because they feel as though it is a waste of money. I think young, healthy individuals will take the risk in not purchasing healthcare insurance in 2014, which the ACA is requiring, since the cost of healthcare insurance far outweighs the fines of not having it.
In order for insurance reforms to not increase premiums dramatically, it is critical that all individuals purchase insurance (i.e. the mandate), otherwise the ACA’s hope of decreasing costs, from an insurance perspective, will disappear.