K
  • July Article: Insurance

    By Randy Kemnitz, MS, CFP©, Subject Matter Expert
    Published July 2014

    Obamacare—just the name is likely to generate a reaction if you mention it at a dinner party. Health care reform, the working name for Obamacare, is actually several legislative acts along with amendments to other existing laws and regulations. The Patient Protection and Affordable Care Act (PPACA), enacted in 2010, is intended to improve access to health insurance, improve consumer protection, and improve the quality of health insurance while lowering the cost of health care.  

    Research has demonstrated that better access to health insurance may improve health (Van Der Wees, Zaslavsky, & Zyanian, 2013). An underlying assumption of health care reform is that the potentially increased cost of insuring those who are less healthy would be partially offset by mandating that all Americans have health coverage. Research indicates this coverage mandate may reduce premiums for everyone (Eibner & Price, 2012). Greater access to health insurance improves health and if mandated for all, may reduce individual premiums.  

    As important as that may be, the real question that should be asked is: how does health care reform affect you and your premiums? 

    The answer is: well, it depends. 

    A feature of the health care reform laws is the mandatory annual review of premiums by the Centers for Medicare and Medicaid Services (CMS). Their first review was published in February 2014. They reported that for those with employer-sponsored health plans, the only group they are required to study, 11,000,000 participants will have premium increases while 6,000,000 will enjoy premium decreases (CMS, 2014). Many other studies have reached similarly mixed results for both employer plans and individual plans (2014).  

    Why is there a difference? Health care reform limits some factors insurers use to price their products. These include limiting pricing decisions on age, group size, and health status (AAA, 2013).  

    The question of how your premiums may change depends in large part on your starting point. If your coverage was less comprehensive than now required, your premiums will most likely be higher because you now have broader coverage. If you are younger and healthy you too may find that your premiums are increasing (AAA, 2013). However if you are unhealthy, you now have access to health care you may not have had in the past and the cost may be lower.  

    The story is similar for employers. In 2013 several large employers suggested that their costs to provide healthcare would increase beginning in 2014, in one case by a projected $100,000,000 (Roy, 2013). The bulk of these increases are the costs of insuring more employee dependents due to the requirement to offer dependent coverage through age 26 and an influx of employees now buying coverage to fulfill the individual mandate. This is consistent with the goal of health care reform increasing access to health care coverage.  

    There is no doubt that health care reform will impact health insurance premiums. How will it affect yours? 

    Well, it depends. 

    For more information on health care reform go to Healthcare.gov and HHS.gov 

     

     

     

    Reference

     

    American Academy of Actuaries (2013). How will premiums change under the ACA? Issue Brief, American Academy of Actuaries, May 2013. Retrieved from http://www.actuary.org/files/Premium_Change_ACA_IB_FINAL_050813.pdf

    Eibner, C., Price, C. (2012). The effect of the Affordable Care Act on enrollment and premiums, with and without the individual mandate. Rand Health Technical Report, Rand Institute.

    Roy, A. (2013).Delta Air Lines: Next Year, Our Health Care Costs Will Increase By 'Nearly $100 Million.' Forbes. Retrieved from http://www.forbes.com/sites/theapothecary/2013/08/22/delta-air-lines-next-year-our-health-care-costs-will-increase-by-nearly-100-million/

    United States Centers for Medicare and Medicaid Services (2014). Report to Congress on the impact on premiums for individuals and families with employer-sponsored health insurance from the guaranteed issue, guaranteed renewal, and fair health insurance premiums provisions of the Affordable Care Act. Retrieved from http://www.cms.gov/Research-Statistics-Data-and-Systems/Research/ActuarialStudies/Downloads/ACA-Employer-Premium-Impact.pdf

    United States Department of Health and Human Services, Center for Consumer Information and Insurance Oversight (CCIIO). Retrieved from https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Market-Reforms/index.html

    Van Der Wees, P., Zaslavsky, A., Zyanian, J. (2013). Improvements in Health Status after Massachusetts Health Care Reform. The Milbank Quarterly 91(4), 663-689.

    Randy Kemnitz, MS, CFP©, is a subject matter expert at Kaplan University. The views expressed in this article are solely those of the author and do not represent the view of Kaplan University.

    _____________________________________________________________________________________________

    We encourage you to share this article if you learned anything (#TIL) or found this useful information. 

    If you are interested in other related financial topics, we invite you to take a look at Kaplan University’s Center for Excellence in Financial Services and our Career Moves site, each of which periodically publish new articles and other content on this subject. 

    And if you are considering a business degree we invite you to find out more about our School of Business and explore Kaplan University’s undergraduate and graduate degree offerings.

    Back to Center for Excellence

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