Millions face sticker shock of health exchanges
'Open enrollment' begins in October for insurer marketplaces
A linchpin of the Obama administration's health overhaul is the establishment of Internet-based health insurance exchanges. These virtual marketplaces are slated to begin operating on Oct. 1 — offering an "open enrollment" period before the start of 2014.
In this restructured market, consumers will be able to make informed choices from clearly defined policies with no fine print — using the exchanges to compare certified health plans with four different levels of coverage (certified as Bronze, Silver, Gold and Platinum), based on price and quality.
Individuals and families buying health insurance will be guaranteed coverage for pre-existing conditions, and the cost cannot vary based on a person's gender and medical history. But smokers can be charged more for individual insurance policies because of their heightened risk of cancer and other chronic diseases.
Consumers can obtain preliminary information about federal-run health exchanges at www.healthcare.gov.
While exchanges hold the promise of greater accessibility to health insurance coverage, the realities could prove different. Participation in the exchanges will start slow, federal officials say, and increase over time.
In a report last month, the Congressional Budget Office estimated that 7 million people nationwide, including self-employed individuals and those who do not receive health insurance through work, will obtain coverage in 2014 through the exchanges. The budget office estimates that number will rise to 13 million people in 2015, and 24 million in 2016 as "individual mandate" penalties rise.
But according to health industry observers, several factors could drive up health insurance costs and decrease participation in the exchanges:
A new federal tax on health insurance beginning next year will add to the cost of coverage for individuals, families and small employers.
Federal tax credits may be insufficient for many small employers, individuals and families to purchase health insurance on the exchanges.
The law's new "age rating" restrictions will make health insurance more costly for young adults than in previous years. And many healthy young adults in their late 20s and 30s might choose to ignore the law's "individual mandate" that anyone without insurance must purchase it.
Next year, insurance carriers will begin paying a new federal tax on health coverage. Critics say it will cost $8 billion in 2014 and be largely passed through to consumers and employers in the form of higher premiums. In the next 10 years, this tax — whose funds will help pay for implementation of the Affordable Care Act — will total $100 billion.
"An average family of four is going to pay $300 more for health insurance next year because of the tax alone," Zirkelbach said. "And the benefit package is going to be more comprehensive but more expensive than what many people have today. The impact that it will have on a person's premium will depend on the type and the amount of coverage they have today."
Millions of consumers will be aided by new federal tax credits to help pay for health insurance. According to the CBO, the average premium subsidy for 2014 on an individual policy will be $5,510.
But the office also found that 43 percent of people in the individual health insurance market today will not be eligible for subsidies. And for those people who are eligible for a subsidy, the tax credit's dollar amount declines significantly as a person's income rises.
Under the law's age rating rules, an older individual can be charged only three times as much as a young adult for the same health insurance policy. Currently, older people are often charged five times the cost of younger adults, or more.
"The young are going to have significant rate increases, but older people may receive reductions. The concept is to level the playing field," said Paul Flotken, managing partner at St. Louis-based Caravus, a group health benefit consulting firm.
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