An analysis of the Affordable Care Act and the challenges it poses for businesses and individual health insurance buyers was shared Wednesday during a Modesto Chamber of Commerce luncheon.
When the new law – commonly called Obamacare – takes effect in January, it will make health insurance more accessible in America, but many may not consider it more affordable, warned Steven Vincent, director of Anthem Blue Cross.
“You’re going to have sticker shock,” Vincent predicted. That’s because insurance rates for those who are young and healthy will increase to subsidize the health care costs of those who have lots of medical needs.
Before Obamacare, Vincent said, insurance carriers typically denied coverage to nearly 30 percent of applicants, based on their individual medical issues. That will be outlawed starting next year.
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People with severe health problems no longer will be denied coverage or charged more for insurance than anyone else of the same age living in the same region. For example, an overweight, chain-smoking alcoholic with heart problems will be charged the same as a physically fit teetotaler who doesn’t smoke.
Since “carriers can’t rate for the actuarial risk they are assuming,” Vincent said, healthy people will have to pay higher insurance premiums to spread out the risk and absorb the costs of health care for everyone. “We fear a lot of young and healthy people may not participate,” said Vincent, who spoke to a crowd of nearly 300 at Modesto Centre Plaza. Getting healthy folks to buy insurance “is the backbone of the funding plan” for the health care law, he said, so there will be financial issues if they don’t join.
The law requires every legal U.S. resident to sign up for insurance, but the penalty for not doing so next year is only $95 or 1 percent of a person’s income. Lower-income residents, however, will be given health insurance for free or at reduced rates.
In California, Vincent said, 67 percent of legal residents will qualify for rate subsidies if they get their insurance through the Covered California health insurance exchange – rather than directly from insurance companies or through their employers.
Vincent said the law won’t allow people who are offered health insurance at work to opt instead for subsidized insurance through the health exchange. He said that may force a working man with a wife and children to pay substantially more for health insurance through his employer than he would if his employer didn’t offer insurance.
Because of that, Vincent said, it “might be advantageous” to some workers with families to have their employers stop offering health insurance benefits so they instead can get government-subsidized coverage.
Of course, someone ultimately has to pay for those subsidizes.
Vincent said 17 new federal taxes and fees have been created to help pay those health care costs, along with new California taxes and fees. Businesses and insurance companies will end up passing on those expenses to consumers, he assured.
Taxes, fees and insurance premiums are likely to increase in future years, Vincent warned, because the law requires the Covered California health exchange to be financially self-sufficient by January 2015.
Other provisions in the 3,000-page law also will push up insurance prices, according to Vincent. He said lawmakers decided all health insurance policies should include certain core features, but about 70 percent of existing insurance policies do not include all those benefits.
Vincent said that’s why insurance companies now are changing so many of their coverage plans and eliminating policies their customers had liked.