With the passage of the Affordable Care Act, You might be wondering why health insurance companies are projecting that premiums will actually increase as a result of the act. After all of the blabber in Washington about how great the act is for affordability, here is some detail to assist you in understanding what’s really happening.
In order to
comply with the requirements issued by HHS, individual and small group plans
(those with less than 50 FTEs) must adhere to the following:
·
All
plans must cover the ten categories of Essential Health Benefits (EHBs):
o
Ambulatory
Patient Services
o
Emergency
Services
o
Hospitalization
o
Maternity
and Newborn Care
o
Mental
Health & Substance Abuse
o
Prescription
Drugs
o
Rehabilitative
& Habilitative Services/Devices
o
Lab
Services
o
Preventative/Wellness
Services & Chronic Disease Management
o
Pediatric
Services Including Oral & Vision Care
·
Cost
sharing for the aforementioned services must accumulate to the out of pocket
maximum (Including copays) and no limits apply to coverage for EHBs.
·
Underwriting
will no longer involve criteria that previously defined risk, such as gender,
health status, group size, claims history, medical underwriting and
industry. Small groups and individuals
will now only be evaluated based on geographic area, age (with a 3:1 maximum
ratio), and tobacco use. This is referred to as an Adjusted Community Rating system of underwriting which will result
in older people paying less and younger healthier people paying more for health
insurance.
All plans (Notwithstanding the size) are subject to the
following requirements:
·
No
exclusions for preexisting conditions.
·
Guarantee
issue and renewability (Self-Funded and Grandfathered plans excluded).
·
Expanded
women’s health care coverage requirements.
·
Participation
in the following taxes and fees:
o
PCORI
Research Fee:
§ Known as the Patient Centered
Outcomes Research Institute Fee, fully insured and self- insured plans will
contribute $1 in 2013 and $2 in 2014-2019 (Indexed for inflation in 2015-2019).
This fee is per member per year and is rolled into the premium.
o
Insurer
Fee:
§ This fee is collected from health
insurance providers based on net written premiums for fully insured
groups. The fee is paid annually and is
a permanent levy on insurance companies.
In 2014, the fee is projected to amount to $8 Billion while it will grow
to more than $14 Billion by 2018. It is
projected to be approximately 2.3% of premiums.
o
Transitional
Reinsurance Fee:
§ This fee is projected to be between
$5-$6 per covered life and will be levied annually between 2014 and 2016. It is designed to distribute funds to
insurers in the non-grandfathered individual market who have attracted a disproportionately
larger share of high medical costs.
o
Risk
Adjustment Fee:
§ This fee is a zero sum redistribution
of premiums from plans that have a low risk population to those that have a
higher risk population. The fee amounts to $1 per member per year for
individual and small group (non-grandfathered) plans and begins in 2014.
While many
of the stipulations required under the ACA are intended to improve the quality
of health care, nothing that good can be free.
Sooner or later, we all pay.
There are approximately 47 new taxes affiliated with the Patient
Protection and Affordable Care Act (PPACA).
We have only highlighted a few of them that directly affect health care
premiums directly in this summary. Indeed,
another well intended election campaign message has flopped in its attempt to
solve a bigger problem.
So who
benefits? Those that fall between 133%
and 400% of the poverty level will be potentially eligible for a premium
subsidy when acquiring a plan through an exchange. That subsidy can be generous and, as a
result, the rest of us will pay through the fees indicated above and through
the many other taxes that the Act has levied.
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