Update: The Healthcare Reform (Obamacare) individual health insurance mandate will take effect in 2014. Health benefits exchanges need to be functioning by October 2013, when enrollment is scheduled to begin (health insurance effective dates won’t start until January 1, 2014, but people should be able to start enrolling in the exchanges next October).
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We’ve written quite a bit about McCain’s health care proposals, but haven’t said much about Obama’s ideas yet. But as I was reading this article from USA Today, I was struck by how simple they make some of Obama’s solutions sound, but how difficult they would be to actually implement. According to the article, Obama would allow individuals to band together to buy health insurance in groups (enabling “individuals and small firms to get all the benefits of the purchasing power of big firms”), and would require health insurance carriers to cover all applicants, regardless of pre-existing conditions. To anyone who is not well-versed in the health insurance industry, this sounds like a wonderful idea. We routinely have clients in Colorado who call us wondering if they can get a group plan for their family, in order to get the “group discount.” The misperception that group health insurance must be less expensive than individual health insurance is pervasive. It sounds good – after all, group discounts are part of many industries, and it’s what people are used to hearing. And many people don’t have any idea how much group health insurance actually costs, especially if they are used to having an employer pay a good portion of their premiums.
But health insurance is a bit counter-intuitive if you’re not used to how the system works. Individual health insurance is less expensive, group plans more expensive. The main reason for this is medical underwriting – individual health insurance companies look at an applicant’s medical history, and can choose whether to offer a policy, whether to exclude pre-existing conditions, and what the premium will be. Group health insurance has to cover any eligible employee who enrolls in the plan, and pre-existing condition waiting periods are limited by HIPAA. (HIPAA doesn’t apply to individual policies). So while there may be more benefits on a group health insurance policy (for example, in Colorado only a handful of individual health insurance carriers offer maternity coverage, but all group plans cover maternity), the price is also higher.
I’m curious how Obama’s plan would allow people to buy in groups without regard for pre-existing conditions, without driving the cost of health insurance even higher. People who buy their own health insurance don’t get any help on the premiums from an employer. Individual health insurance premiums are already high – how will basically turning all plans into group plans help with the cost of health insurance? I’m very much in favor of expanding access to health insurance for people with pre-existing medical conditions. But how do we do this without pushing the overall cost of health insurance out of reach of the average American family? It has to start with the health care system. Attacking the problem from the health insurance side is putting the cart before the horse. Yes, health insurance costs are out of control – but until we get health care costs in line with what the rest of the world spends, there is no way we’re going to get our health insurance premiums down to a reasonable level.
While I’m pleased to see health care taking such a major position in this election, I’d like to see both candidates focus on the underlying costs of our entire health care system, rather than just looking at ways to get everyone insured. Because if people can’t afford the insurance, and if insurance companies can’t afford to pay claims, simply having access to insurance won’t solve our health care problems.