Most Americans Might Not See Big Premium Hikes, But The Individual Market Is Different

One of our all-time favorite bloggers, Julie Ferguson of Workers’ Comp Insider, hosted the most recent Health Wonk Review – the “why hasn’t spring sprung?” edition.   Maybe Julie just needs to move to Colorado… here on the Front Range, we’re definitely starting to see signs of spring – today was a beautiful sunny day, no jacket required (That’s the whole album!  You’re welcome!)

We thought one of the most interesting articles in this HWR came from Anthony Wright, explaining how health insurance premiums projections for 2014 and beyond are anything but precise, and that the “rates are going way up!” hoopla might be nothing more than scare tactics.  Anthony notes that the bulk of the changes brought on by the ACA apply to the individual market, and that’s only about 5 – 10% of the total population.  People with large group health insurance, or a government-run policy like Medicare or Medicaid, won’t see many changes in policies or premiums.  The small group market will see some upheaval – mainly in terms of employers potentially opting to have their employees purchase health insurance through the exchanges instead of offering a small group plan.  There could also be some premium increases in the small group market due to the ACA requirement that small group deductibles not exceed $2000.  Better coverage = higher premiums.  Fair enough, but not everyone would choose that level of coverage if left to their own devices.

But even still, it’s the individual market that will incur most of the changes brought in by the ACA, including premium adjustments.  And although the individual market encompasses a small segment of the overall population, it encompasses all of our clients.  Just about every single client we’ve worked with over the past decade has individual health insurance.  Our own family Individual health insurance premiums increasinghas an individual policy.  If there are significant premium hikes in the individual market next year, they have the potential to impact a large number of our clients, so it’s definitely an issue on our minds.  Anthony points out that the premium subsidies will cap a household’s total health insurance premiums for a “basic coverage package” at 2% – 9.5% of their income, depending on their income level, for families that earn up to 400% of poverty level.  But that means that a family of four earning $93,000/year could end up paying $8835 for health insurance in 2014.  To put that into perspective, our own family of four pays $4,836 in annualized premiums right now, for our Anthem Blue Cross and Blue Shield individual plan.  I used the $93,000 income just because it fits conveniently at the very top of the income scale that makes a family eligible for subsidies.  A family earning a few thousand more than that would have no subsidy at all (and according to that same subsidy calculator, the full price for that family’s health insurance, assuming they were not eligible for any subsidy, would be $11,632.  This is all projections, and none of it is set in stone yet, but it’s still significantly more than our family of four currently pays for individual health insurance).  So back to our hypothetical family of four with an income that puts them just barely into subsidy-land.  Even with a subsidy, they could potentially end up paying several thousand more per year for health insurance than they do now.  That is worrisome, no matter how you look at it.

Overall, looking at health insurance premiums for everyone in the US, I agree with Anthony:  Most people don’t need to worry.  But for people in the individual health insurance market, especially younger, healthier people, and families with higher incomes, there is cause for concern.  Whether it will come to pass or not is still outside of our predictive abilities though.

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