Individual health insurance
What you can expect in 2014 under the Affordable Care Act
September 11, 2013
|What is an exchange?|
|Shopping the exchanges|
|Essential benefits in ACA|
|The federal exchange|
|Will you get a subsidy?|
|Will you owe a penalty?|
|Types of exchanges|
Although most Americans get their health insurance from an employer or from the government, individual health insurance is designed for people who are self employed or who do not have access to an employer-sponsored or government health plan. Historically, individual insurance in almost all states has involved medical underwriting, which meant that securing a policy could be difficult for people with pre-existing conditions.
Most health insurance companies are for-profit entities (and even non-profit carriers cannot operate at a loss). They have to take in more money in premiums than they pay out for medical claims. In the individual market, medical underwriting has traditionally been the way they accomplish this. People with pre-existing conditions can be declined for coverage, or offered a policy with an increased premium or an exclusion riders that eliminates coverage for pre-existing conditions.
But all of this is changing in 2014.
The ACA makes individual health insurance guaranteed issue as of January 2014. This means that medical history will no longer be a factor in determining whether an applicant can get a policy, or how much the policy will cost. Individual health insurance will be issued with modified community rating, which means that premiums will vary based on geographical area, age and tobacco use. But increased initial rates based on medical history will no longer be allowed, nor will pre-existing condition exclusion riders. And nobody will be declined for coverage based on a pre-existing condition.
Until the end of 2013, healthy applicants can still apply for underwritten individual plans. Many carriers will allow insureds to keep these plans until their renewal date in 2014, which might be a good option for people who won’t qualify for subsidies in the exchanges and would prefer to keep an underwritten, lower-priced plan for as long as possible.
Health insurance is a necessity, and it’s also required by law in 2014.
All but the most wealthy among us need health insurance to protect against bankruptcy in the event of a serious illness or injury, and to secure access to expensive life-saving medical care if we need it. Although lawmakers saw that removing medical underwriting from the individual health insurance market was necessary in order to extend coverage to everyone, they also knew that this had the potential to create significant adverse selection in the market. There was just too much potential for people to wait to apply for a policy until they needed medical care, knowing that the coverage would be guaranteed issue.
So the ACA includes two provisions to prevent this: With very few exceptions, everyone will be required to have health insurance starting in 2014 or pay a penalty. And individual health insurance will only be available for purchase during open enrollment windows.
Initial open enrollment will be six months (October 1, 2013 to March 31, 2014) in order to accommodate the significant influx of new insureds. After that, open enrollment will be much shorter, from October 15th to December 7th each year. Outside of the open enrollment window, individual policies will only be available for people who have a qualifying event (birth, adoption, divorce, mariage, or loss of other coverage).
What can you expect?
Individual health insurance will be available both in and out of the exchanges. You’ll be able to purchase health insurance through a trusted broker, directly through a carrier, or via your state’s exchange. The first thing to do is figure out if you qualify for a premium subsidy or cost-sharing subsidy based on your household income. If you do, you’ll definitely want to get your health insurance through the exchange, because that’s the only way the subsidies are available.
Individual ACA-compliant plans are rated with “metal” designations, which helps consumers compare apples to apples. There is plenty of variation from one carrier to another, both in terms of plan design and price, but policies are labeled based on their actuarial value, or the percentage of costs that the plan covers before the out-of-pocket maximum is reached.
Bronze plans will cover roughly 60 percent of costs, Silver plans 70 percent, Gold plans 80 percent, and Platinum plans 90 percent. For people under age 30 or those with income-based hardship qualifications, catastrophic plans are also available. All plans are subject to out-of-pocket maximums which cannot exceed $6,350 for an individual or $12,700 for a family in 2014. Cost-sharing subsidies are only be available on Silver plans. Premium subsidies for eligible applicants can be applied to any of the “metal” plans.
The exchanges will be open for business on October 1, 2013, with coverage available as of January 1, 2014 (exchange opening may be delayed in some states, but it likely won’t matter in the long run, and policy effective dates of January 1, 2014 should be available in all states). If you’re currently enrolled in a high risk pool, you’ll be transitioning to a new ACA-compliant plan as of 2014.
Exchange navigators and licensed brokers will be available to help applicants determine their best course of action during the transition to ACA-compliant plans. Although it might take a while to iron out all the wrinkles, the ACA changes to the individual market will result in far fewer people being uninsured, better access to healthcare, and more affordable coverage for people who are most in need of financial assistance.