How much will insurance under Affordable Care Act cost you?

By Greg Grisolano, Land Line staff writer | 9/30/2013

You’ve probably read at least one story in the past week that touted the prices set for new health care exchanges that will open on Oct. 1 under the Affordable Care Act.

The basis for many of these reports is a brief issued by the U.S. Department of Health and Human Services Office of the Assistant Secretary for Planning and Evaluation, which outlines the weighted average of the lowest cost plans in the 36 states set to open federally administered exchanges

What those exact costs will be, however, are still to be determined, according to Rick Welsh, president of Welsh and Associates, a Kansas City-based health care and insurance consulting business that works with OOIDA’s Medical Benefits department.

“I cannot tell you anything until these exchanges are open and I can actually get you a quote, I don’t even want to hazard a guess,” Welsh told Land Line. “You’re talking about an average of male-versus-female versus smoker-versus-non-smoker in wildly different areas of the country. It really doesn’t mean anything to you until you get an actual quote for yourself, in your ZIP code, with your demographics.

“In general, younger healthier people are going to have to pay a little bit more, and older folks, people that have health conditions, will probably benefit a little bit and see better costs at these exchanges,” Welsh said.

The Department of Health report cited a weighted average premium for a 27-year-old non-smoker, regardless of gender would be $163 per month for the lowest cost “bronze” health care plan, the minimum level of care to be provided under the new law. The report quoted $203 for “silver” plans, which provide more benefits than the bronze. The cost was reported at $240 for the more comprehensive “gold” plan. None of those costs include possible tax rebates, which will be available to some individuals and families based on income and eligibility for other aid programs, like Medicare and Medicaid.

The Department of Health report, which can be viewed in its entirety here, also notes fluctuations in rates. The 27-year-old example may only pay an average of $134 in Illinois per month for a bronze plan, but in neighboring Indiana, the average cost could be $200 a month for the same plan.

Welsh said he’s expecting rates to “vary wildly” – both from state to state, and even intrastate – based on where the policy holder lives. He said he expects rural areas to see higher rates than more densely-populated communities, based primarily on access to a wider variety of providers to compete for offering care and services.

Populated areas with many hospitals and medical providers competing for business tend to drive down healthcare costs because of that competition. Rural areas with fewer options will see higher rates because of the lack of competition for hospitals and medical providers.

One of the biggest differences going forward under the ACA will be insurance providers operating under the idea of a modified community rating, wherein the gap from the lowest-cost plans to the highest-cost will decrease significantly.

Under the outgoing system, “a young, healthy male who answers all the questions no, he pays $80 a month,” Welsh said. “And we have some people paying $2,200 a month. With community rating, now that’s going to shrink. We’re obviously not asking any medical questions whatsoever, but it’s going to be from $240 (a figure cited in the Health Department report as the average monthly price of the lowest-cost Gold plan, before tax credits), to say, $600 a month. So it’s a much narrower band.”

The ACA is also causing sweeping changes to the types of insurance that must now be offered.

All plans, whether offered by employers, through a state or federally-operated exchange, or through private and third-party providers must now meet minimum standards of care. In addition, many so-called “catastrophic coverage” plans with lower premiums but higher out-of-pocket costs, will no longer be options. Those plans do not meet ACA mandate that insurance plans cover a minimum of 60 percent of allowed medical expenses, while also capping annual out-of-pocket spending at $6,350 for individuals and $12,700 for families.

“You won’t have these really bare-bones plans, or extremely high-deductibles, a $10,000-deductible and so forth,” Welsh said. “The plans are pretty well-controlled on what their minimum essential coverages they have to provide. Like prescription drugs and so forth.”

The open-enrollment period this year is slated to be from Oct. 1 to March 31, 2014. Coverage begins Jan. 1, 2014 for those who enroll in 2013.

Welsh said future open enrollment dates will only last about two months, rather than the five-month window this year.

“I try to make sure everybody understands that this open-enrollment period is Oct. 1 to March 31. That’s this year only,” he said. “Next year it’s Oct. 15 to Dec. 7. So it’s a much shorter open enrollment period and people need to be aware of that. Once the enrollment period ends, you cannot enroll unless you have a qualifying event.”

Qualifying events could include a loss of insurance because of losing a job that provided insurance. Also you could enroll if you lose the option of being covered under a spouse’s plan, as ACA will no longer require group plans to offer dependent coverage.

“The Affordable Care Act does tell employers that they do not have to offer coverage to dependents,” he said. “Obviously employers’ costs are going up. Everyone acknowledges that. It’s going to be more expensive for an employer to have a group plan. And if they want to control costs by kicking the dependents off the plan, they could.

“You’re certainly not going to see anything right away. Nobody’s going to do anything that disruptive. If you did lose it involuntarily like that, you could go to the exchange right away, no questions asked.”

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