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Were individual-market health plans less expensive before Obamacare?

A 35-year-old says that before the ACA, his health insurance premiums were $150 a month with a $50 deductible. But did he have a true major medical plan?

Reviewed by our health policy panel.

Q. I’m following an online debate about health plans before and since ACA. One person (a non-smoking male, age 35, with no dependents, from Missouri) is saying that before the ACA was implemented, his plan cost $150 a month and he only had a $50 deductible “for everything.” That seems surprisingly inexpensive. Were individual plans that inexpensive before Obamacare took effect?

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A. It’s extremely unlikely that this person had a true major medical plan. $50 deductibles disappeared in the individual market long before the ACA. Without seeing more details about this person’s plan, it’s hard to say exactly what he had. It might have been a fixed indemnity plan with a $50 deductible, or something along the lines of this pre-ACA plan we profiled several years ago.

It’s also possible that he had employer-sponsored coverage. (Deductibles tend to be lower in the employer-sponsored market, and employers pay the bulk of their employees’ premiums, but costs have increasingly been shifted to employees over the years, in a trend that pre-dates the ACA.)

Missouri’s market was pretty standard pre-ACA. This data from ehealthinsurance is a good approximation of what people were buying in the individual market and how much it cost. Nationwide, as of 2013 – for true major medical plans – the average premium for a single individual was $197/month, and the average deductible was $3,319.

So it’s very possible that his premium was $150 – men had lower rates and he was on the younger end of the spectrum. But it didn’t have a $50 deductible if it was a real major medical plan.

Although this particular plan may not have been worth reminiscing over, it fairly common for people who earn more than 400% of the federal poverty level (and are thus not eligible for premium subsidies) to be paying a lot more in premiums now than they used to pay for pre-ACA major medical coverage. That’s especially likely to be true if they’re healthy and never had to contend with any medical underwriting hurdles.

Among people who shopped on the ehealthinsurance platform during the open enrollment period for 2019 coverage, the average individual premium was $448/month. And among people who shopped on HealthCare.gov, the average premium was $612/month before any subsidies were applied. (Both platforms were selling ACA-compliant plans, but people shopping outside the exchange are more likely to select lower-cost options, as they have to pay the full cost themselves, with no subsidies.) Compared with the $197/month average premium in 2013, that’s a pretty drastic increase. (Again, the full price only applies to people who don’t get premium subsidies.)

But it’s worth noting that premiums were increasing substantially in the pre-ACA years as well, and would have been much higher by now even if health care reform hadn’t been implemented and coverage in the individual market hadn’t been improved. The $197/month premium would have been long gone by now.

The rate increases in the individual market since the ACA was implemented are due to a combination of medical cost inflation (which was already a factor pre-ACA), more robust benefits, and the elimination of medical underwriting. (It’s noteworthy that in New York, which had eliminated medical underwriting many years before the ACA – but which did not have any premium subsidies or individual mandate pre-ACA –inflation-adjusted premiums are still much lower than they were in 2013.)

People who have pre-existing medical conditions likely recognize how beneficial the ACA has been, as their access to individual-market coverage would have been limited, expensive, or non-existent prior to 2014, depending on where they lived. Pre-ACA, more than half of the people who needed individual market coverage were either rejected altogether, advised to not apply due to their medical history, or offered coverage that either came with pre-existing condition exclusions or a higher premium based on pre-existing conditions.

But people who are healthy and also ineligible for subsidies are understandably frustrated by the sharply higher premiums (despite the fact that their premiums would have continued to climb sharply each year even without the ACA). And it’s also important to remember that pre-existing conditions can develop overnight.

It’s also worth double checking subsidy-eligibility in the exchange, keeping in mind that subsidies are available for a family of four earning $103,000 in 2020, and that contributions to retirement accounts and/or a health savings account will reduce your income that’s used to determine your subsidy eligibility. For people who qualify for premium subsidies, the average after-subsidy premium in 2019 was just $87/month — well below the average premium that people paid in 2013 for much less robust coverage.


Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org. Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.

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Neil McLeod
Neil McLeod
1 year ago

That really clears things up! What a joke our medical insurance has become!

John Galt
John Galt
8 months ago

Before Obamacare, my copay was only $20, no matter the reason for the visit. I now have a $1500 deductible. I rarely ever use that much in medical costs so basically, I pay for my own health expenses in addition to paying for insurance. The cost for insurance also increased enough that my (admittedly small) raise in 2014 was essentially wiped out. Cost of insurance for middle class families has gone up since Obamacare was implemented; what the answer above doesn’t discuss very well is that not everyone gets all the supposed subsidies…and if you get the subsidy, taxes are paying for them anyway. In addition, health insurance company profits have nearly doubled since Obamacare was implemented.

Jonathan
Jonathan
8 months ago

I too am sure I paid 375 a month for family thru bc/but. Now it’s 650 that’s a huge difference

Kimberly
Kimberly
4 months ago

I paid out-of-pocket with no employer subsidy pre-obama care and I was able to get an EXCELLENT PPO for $150/mo with a $15 copay (specialists included) and a $500 deductible. I’d pay about $600-$700/mo out-of-pocket for that plan now. Obamacare is a very expensive JOKE.

Louise Norris
Editor
4 months ago
Reply to  Kimberly

Keep in mind that Obamacare was enacted 11 years ago. Employer-sponsored health coverage had far fewer changes as a result of the law, and yet premiums for a single employee have increased by nearly 50% from 2010 to 2020 (here’s the 2010 info: https://www.kff.org/wp-content/uploads/2013/04/8085.pdf and here’s the 2020 info: http://files.kff.org/attachment/Report-Employer-Health-Benefits-2020-Annual-Survey.pdf)
As noted in the article, it’s also important to keep in mind that people with pre-existing conditions found it expensive or impossible to purchase individual/family (non-employer-sponsored) health coverage pre-ACA, whereas pre-existing conditions no longer affect an applicant’s eligibility or premium.
It’s also important to understand how robust the premium subsidies are for individual/family plans under the ACA. And the American Rescue Plan, which appears likely to be enacted this week, would boost those subsidies considerably and extend them to a lot more people: https://www.healthinsurance.org/blog/2021/03/05/how-the-american-rescue-plan-act-would-boost-marketplace-premium-subsidies/

D Moreno
D Moreno
1 month ago
Reply to  Louise Norris

Accept premiums WEREN’T increasing prior to the enactment of the ACA. In fact there are multiple studies that contradict your assertions.

“ACA advocates have been able to respond that those are cherry-picked cases, or that premiums were increasing before the ACA and would have increased anyway.”

“It turns out that across the board, for all ages and family sizes, for HMO, PPO, and POS plans, premium increases averaged about 60 percent from 2013, the last year before ACA reforms took effect, to 2017. ”

“Overall, Health Maintenance Organization (HMO) premiums actually decreased 4.6% in the four years before the ACA reforms came into effect (that is, from 2009 to 2013), but increased 46.4% in the first four years under the ACA. Point-of-Service (POS) premiums decreased 14.9% before the ACA, and increased a whopping 66.2% afterwards”

https://www.forbes.com/sites/theapothecary/2017/03/22/yes-it-was-the-affordable-care-act-that-increased-premiums/amp/

Now start tossing around the LARGE discrepancy between PRIVATE insurer reimbursement vs Medicare or medicaid reimbursements. Then wonder how unachievable M4A would be in a diverse population of over 331 MILLION people.

It’s a LEAP trying to find the overall positive outcome of the ACA act. How do they UNRING that bell ? Healthcare costs were rising as a percentage of GDP long before C-19.

Louise Norris
Editor
1 month ago
Reply to  D Moreno

I’ve worked in the individual insurance market since 2003, and premiums were certainly increasing in the decade prior to the ACA. That Forbes article indicates that the data were pulled from eHealth, but eHealth’s 2008-2017 report shows that premiums were indeed increasing in the years before the ACA: https://news.ehealthinsurance.com/news/average-individual-health-insurance-premiums-increased-99-since-2013-the-year-before-obamacare-family-premiums-increased-140-according-to-ehealth-com-shopping-data From 2008 to 2013, average premiums in the individual market grew by 24%, and there was never a year when they decreased.

If you weren’t familiar with the individual market pre-ACA, it might seem like “a leap trying to find the overall positive outcome of the ACA.” But in nearly every state, people with serious health conditions simply could not enroll in individual market health coverage pre-ACA. They were stuck with a high-risk pool (not available in every state) or had to maintain employer-sponsored health coverage.

And the benefits that were provided by individual market plans were rarely comparable to the benefits people could get on employer-sponsored plans. As an example, it was rare to find an individual market plan that covered any maternity care at all pre-ACA, unless you were in a state that mandated it. And in the years leading up to the ACA, it was becoming increasingly common to see individual market health plans with prescription coverage that only included generic medications (not particularly helpful if you’re diagnosed with a condition that requires expensive brand-name or specialty drugs).

Simply put, the reason premiums were so low in the individual market pre-ACA (dramatically lower than employer-sponsored health insurance premiums) was because the plans did not accept people with serious pre-existing conditions, often excluded less-serious pre-existing conditions, and often provided limited (or zero) coverage for things like maternity care, mental health care, and prescription drugs.

Roughly 85% of all marketplace enrollees have been receiving premium subsidies since 2014, and average subsidies cover the majority of average premiums. But the ACA’s “subsidy cliff” was a significant problem: People with income just a little above 400% of the poverty level could face premiums that amounted to an unworkable percentage of their income. Fortunately, the American Rescue Plan, which was just enacted in March 2021, has eliminated the subsidy cliff for 2021 and 2022: https://www.healthinsurance.org/obamacare/beware-obamacares-subsidy-cliff/

The American Rescue Plan has also made subsidies larger across the board, and made coverage affordable for people receiving unemployment benefits: https://www.healthinsurance.org/glossary/american-rescue-plan/

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