6 Ways the Affordable Care Act Will Impact Individual Health Insurance
NYS Health Plan Association July 1, 2013
Excerpts by NYAPRS
Beginning in 2014, the Affordable Care Act (ACA) will fundamentally change the New York insurance market, providing more comprehensive benefits and expanding and subsidizing coverage for some individuals and small businesses. The ACA was designed to enable New Yorkers to get more comprehensive coverage that is also more affordable.
Not only is insurance coverage different under the ACA, the method by which many purchase coverage is also changing. The ACA creates state-based marketplaces called exchanges for individuals and small businesses to purchase insurance for their employees. It is projected that more than one million New Yorkers1 who previously were uninsured will get coverage as a result of marketplace reforms, expanded Medicaid eligibility and federal subsidies.
Factors such as higher enrollment, more comprehensive benefits and cost-sharing limitations-and many others-will affect health care costs and, in turn, health insurance premiums in different ways.
The biggest impacts will be seen in the individual health insurance market. With three out of four New Yorkers receiving their coverage through their employers or the government, only a small segment of the state’s population will purchase their insurance through the New York Health Benefits Exchange. While many of these individuals will pay less for coverage, some New Yorkers will see premiums rise.
Here are some of the cost pressures that will impact health coverage in the individual market beginning in 2014.
1 You Will Be Buying A Different Policy.
Individual coverage in New York will dramatically change in 2014. Many people buying coverage for themselves and their families will be able to choose from an entirely new selection of policies with more comprehensive benefits and services known as the “essential health benefits” package. Beginning in 2014, all new insurance policies must include these essential benefits.
As a result of these changes, consumers in the individual market will be purchasing coverage that more closely resembles employersponsored insurance. For some New Yorkers in the individual market, this coverage will cost more than the policies they have today, while others will find the cost of coverage is less.
2 Your Health Plan Will Pay A Significant Percentage Of Costs.
The ACA requires health plans to cover a significant percentage of average costs.
For some individuals in New York, it means that premiums will be lower and cover more benefits and services. In addition, the ACA requires that out-of-pocket expenses (co-pays, deductibles and co-insurance) be capped, and prohibits health insurers from imposing any annual or lifetime limits on your coverage.
Under the ACA, health plans must cover a minimum of 60% of average costs under a so-called “bronze plan.” Consumers can also choose among plans where the insurer pays 70% (silver plans), 80% (gold plans) or 90% (platinum plans) of average costs.
With these plans, the premiums will be higher but out-of-pocket costs will be lower.
3 Your Insurance Will Provide More Comprehensive Benefits.
The ACA requires all plans offered through New York’s Health Benefit Exchange to cover a wide range of benefits and services that may or may not have been included in many health plans prior to 2014, such as prescription drugs and pediatric dental and vision care. For example, the Healthy New York program has a streamlined benefit package that covers most essential health needs and offers an optional prescription drug benefit. Beginning in January 2014, individual New Yorkers who had coverage through the Healthy New York program will no longer have that option. Instead, they will buy one of the many products that will be available through the Health Benefit Exchange, with those products required to include the new broader essential health benefits package. Covering these new benefits will increase total health care costs, which will in turn raise premiums.
4 You Can’t Be Denied Coverage For Preexisting Conditions And You Can’t Be Charged Higher Premiums For Poor Health Status.
The ACA requires health plans to issue coverage to anyone who applies for it-this is known as guaranteed issue-and plans will be prohibited from charging higher prices based on health status-a practice called community rating. In New York, in addition to barring higher prices based on a person’s health status, community rating also prevents price differences based on age
or gender. Prior to adoption of the ACA, New York did allow a waiting period-up to 13 months-before plans were required to cover a person’s preexisting condition.
The reason behind the waiting period was to discourage people from waiting to get health insurance coverage until they had a serious illness.
Since 1996, New York has required all HMOs in the state to provide coverage to individuals not offered benefits by an employer or who are self-employed.
Known as the Individual Direct Pay market, health insurers offer two standardized, comprehensive plan options. New Yorkers enrolled in this program-currently only about 21,000 individuals-tend to have chronic conditions that are expensive to care for.
Another New York program for individuals and sole proprietors is the Healthy New York program. This program offers a comprehensive, but more streamlined benefit package, as well as state funding to help keep premium costs affordable.
Under the ACA, both the Direct Pay and Healthy New York program for individuals will be eliminated. People who previously were required to wait some period of time to get coverage for preexisting conditions will be able to get it immediately. Shifting these individuals into the Health Benefits Exchange and paying for these individuals’ costly medical conditions will increase the total health care costs of everyone in the insurance pool on average.
5 Higher Anticipated Enrollment Among Older Individuals Means Higher Health Care Costs.
The ACA requires everyone to purchase health insurance or pay a penalty. Currently there is some debate as to exactly who will come into the insurance pool. Some argue that the new exchange coverage will attract a young and healthy population, which will help lower the “risk” and costs for
everyone getting this new coverage. Others, however, maintain that the penalties, at least in the early years, are so low that those younger, healthy people will stay out of the pool and that many more of those entering will be Baby Boomers, which will increase the average age of the insured population.
Since people tend to need more health care as they age, total health care costs for everyone in the insurance pool will increase. They add that those younger New Yorkers who enroll in the early phase are also more likely to have health care needs that have been neglected due to the cost of coverage.
This pent up demand for services will result in higher health spending, with those increased costs being shared by everyone in the insurance pool.
6 Many People Will Be Eligible For Subsidies.
Many individuals and families who currently do not have insurance coverage will qualify for public insurance (Medicaid) or federal subsidies to help them purchase coverage. Some people will qualify for subsidies to help pay their premiums, as well as their out-of-pocket expenses.
The subsidies offered through New York’s Health Benefit Exchange will mean most moderate- to low-income New Yorkers will pay less for coverage than they did before the ACA and they will have better benefits as well.
However, the Congressional Budget Office estimates that more than 40%
of people purchasing coverage in the individual market today would be ineligible for premium subsidies.
For more information, go to http://www.nyhpa.org/