Millions face sticker shock of health exchanges

President Barack Obama's ambitious goal that all Americans have access to health care will take a huge step forward this fall with the opening of federal and state insurance exchanges.

But it is too soon to tell whether these bold creations of the Affordable Care Act will actually bring "affordable" care to consumers. Some observers say escalating health care costs will still find ways to tap and drain the bank accounts of individuals and families.

With less than seven months until health insurance exchanges begin open enrollment in some states, regulators are scrambling to implement the new law's most sweeping — and most expensive — changes.

Health exchanges are a key part of the president's plan to make health insurance coverage available to tens of millions of Americans who are uninsured. And his overhaul of the U.S. health care system also is certain to impact the lives and checkbooks of many Americans who have health insurance.

Among the 2,500-page law's myriad provisions, individuals with pre-existing conditions who have been unable to purchase health insurance no longer will be excluded for chronic illness or a history of medical claims. Insurers won't be able to drop coverage when someone gets sick. Plans will have to offer more generous benefits, such as capping out-of-pocket expenses and providing free preventive care. Premiums for older consumers cannot be more than three times the cost for younger consumers.

Federal and state exchanges were designed to create a robust, competitive market for private insurers to provide affordable coverage to individuals and small businesses. And the Obama administration is gambling that enough small employers and young and healthy Americans will purchase health insurance to ensure the affordability of health premiums for all.

"Maximizing participation in the exchanges is absolutely critical to the success of the law, which was all about expanding coverage," said Sarah Dash, a project director at Georgetown University's Center on Health Insurance Reforms. "But I think success is going to be in the eye of the beholder, and the success of it will play out over a few years. … From a consumer's perspective, what matters most: Did people get coverage? Is the coverage affordable to them? And does it ultimately connect people to the care they need?"

Federal subsidies in the form of tax credits will help lessen the impact of more costly premiums on low-income Americans, but the incomes of many households will be too high to qualify for subsidies. This will be even more of a problem in states that refuse to expand Medicaid, leaving many working poor unable to qualify for help.

New policy rates have not yet been made public, but there will surely be winners and losers as insurance companies redistribute the costs of these benefits and begin paying a new tax on health coverage. And pricing for many Americans could run even higher if many of the young and healthy decide to "opt out" of the law's individual mandate — choosing to pay fines rather than buy costly insurance.

Federal officials are forecasting that an expanded and highly competitive individual and small group health insurance market will help slow the growth of health care spending in the long run. Yet, fewer consumers will take advantage of the new market if insurance prices are high at the start.

"You need broad participation from the young and healthy as well as everyone else to make health insurance affordable and for the health exchanges to work," said Robert Zirkelbach, a spokesman for America's Health Insurance Plans, a Washington-based trade group whose members include major insurers. "The million-dollar question is whether there will be enough participation."

Even given the best scenario for full-fledged participation on the health exchanges, experts say, insurance premiums are likely to rise in 2014.

Federal, state exchanges