Concerns about the Affordable Care Act   2 comments

Some of the reasons why the Affordable Care Act (ACA) gives me a great deal of concern about it’s potential economic impact:

  • Employers are required to provide coverage if they have 50 or more full-time employees, or face paying taxes and fines
  • Individuals are required to carry coverage, or face paying taxes and fines
  • A 5% Affordable Care Act tax to subsidize uninsured individuals
  • Limits employer contribution to flexible spending account to $2500
  • Confusing definitions on who is an employee vs sub-contractor
  • An excise (read: sales) tax will be charged on “Cadillac” health plans starting in 2018

The two really serious kickers to the whole program:

  •  Health insurance companies will be required to spend at least 80% of premiums collected on the provision of care, drastically limiting how much revenue can be used for administrative costs and profit.  This will likely create incentive for companies to reduce overhead expenses, such as customer service and claims-processing employees.

AND THE MOST CONTROVERSIAL POINT OF ALL:  

  • Starting in 2014, health insurers cannot charge higher rates to those who will use more medical services (and thus costing insurers more money)!!  This creates a subsidy situation where customers who don’t use medical services very often will still pay increased premiums to pay for the medical services of those who use them more often.

In other words, forget underwriting, forget being able to charge more for the customers who will cost more.  EVERYONE is going to have to pay more in order to subsidize those who are more expensive to the insurance companies – for example, people who have pre-existing conditions and, usually, women.  I certainly have nothing against women.  But if the reality is that insuring a woman is more expensive that insuring a man, then a comparable plan for a woman should cost more than a man’s.  That, unfortunate though it may be, is how insurance works – if you cost more, you pay more.  This will no longer be the case under the Affordable Care Act.

Not charging more for those with pre-existing conditions would be comparable to an auto insurance company not being allowed to charge more for drivers who have prior claims.  So even though people with pre-existing conditions will cost carriers more money than those without pre-existing conditions, they cannot be charged more.  Top that off with the 80% premiums-for-care requirement, and we are facing a situation where a health insurer cannot hire the most qualified individuals (because they are not allowed to divert the money from revenue for care), cannot provide the best services (by hiring more customer service representatives, adjusters, billing employees, etc), and cannot charge people based on their potential cost to the company.

Dog Blog ACA

The Insurance Dogger is not looking forward to 2014 or the implementation of the ACA….

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2 responses to “Concerns about the Affordable Care Act

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  1. great breakdown for us lay-folk. do you foresee new medical insurance plans appearing to just undercut penalties with minimal coverage plans? To comment on women paying more for coverage, we do get a break on life insurance. glass half full I guess…

    • Erin,

      As I understand it, health insurers are required to re-design their plans to meet certain guidelines required by the ACA. Certain coverages, provisions, and other plan options must be made available to everyone – making coverage more uniform, but also far less specialized.

      In addition, without the ability to charge for “claims history,” if you will, carriers will become far less competitive from one to the next. That’s my own speculation, however, so take that with a grain of salt.

      So, to answer your question, no, I don’t believe that carriers will be able to put together a minimal coverage policy that will undercut the fines/taxes you (as an individual) would have to pay if you don’t carry anything at all.

      I do not know what the fines/taxes will be for a business, but I imagine they will be much heftier than those for individuals.

      Thanks for your question!

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