Will health care reform raise health insurance premium costs? The answer is “It depends”.
The goal of the Affordable Care Act (health care reform) is to provide insurance to as many Americans as possible. One of the biggest barriers to achieving this is the high cost of health care. For many Americans, health insurance is unaffordable.
To help address this, individuals and families whose incomes are below 400% of the Federal Poverty Level (FPL) can receive premium assistance from the Federal government in the form of a tax credit.
To qualify for the credit, individuals must purchase insurance through the Healthcare Marketplace. They can not be eligible for qualified coverage from another source, such as an employer sponsored plan, and they must be lawful residents of the State where they purchase their insurance.
For a family of four whose income is 150% of the FPL, their annual contribution toward the health insurance premium costs will be limited to 4% of their family income. Based on 2012 Federal Poverty Guidelines, this would equal $1,383 annually.
If the family’s income is 133% of the FPL, the contribution is 3%.
As a result, people qualified to receive premium assistance are likely to pay less for their health insurance after health care reform than they would today.
However, for those individuals not qualified to receive premium assistance, the situation will be different.
If a person currently has individual insurance which is medically underwritten, his or her premium is likely to go up. This is because insurers will be required to offer insurance to everyone, regardless of their health. The increase in the number of insured individuals with health conditions means cost – and thus premiums – will increase.
Plan designs will change as well.
Many of the plans currently sold in the individual market provide less coverage than will be required under the Affordable Care Act.
The Commonwealth Fund estimates more than half of Americans with individual health insurance have policies that fail the minimum coverage requirements.
Age will also be a factor in determining what happens to individual premiums.
Today, the cost of health insurance for younger individuals is much lower than it is for older people. While policies for younger individuals will continue to be less expensive under health care reform, the differences in price between the older populations and younger will be much smaller.
According to an actuarial analysis conducted by the consulting firm Oliver & Wyman, individuals ages 18 to 34 could see their premiums increase 35%. Correspondingly, individuals age 55 to 59 may see a drop of 12%.
Jonathan Gruber, Professor of Economics at MIT, estimates the provisions of the Affordable Care Act will increase individual insurance premiums in Colorado by 19%.
However, the financial assistance provided by the Federal government will more than offset the rise in premiums for most families, according to Professor Gruber.
He estimates 70% of those who currently have individual insurance in Colorado will pay less, despite the increase in premiums.
So when you ask whether health care reform will increase how much you pay for health insurance, the answer is it depends on who you are.