The Affordable Care Act: Doubling Health Insurance Rates Near You

December 20, 2012

Aetna CEO Mark Bertolini stated that premiums are likely to increase 25 percent to 50 percent on average in the small-group and individual markets, with some markets going up as much as 100 percent.

100 percent?

I have had my own conversations with company representatives that have also corroborated these predictions.

You're Talking About THE Affordable Care Act, Right?

Yep, sure am.

It seems the Federal Government is having a bit of a spat with reality. Regardless of the fact that people keep telling them rates will go up, they still believe this landmark piece of legislation will drastically reduce the cost of health insurance in this country.

Who Should You Believe?

That’s a great question, and one that will find people on both sides of the line adamantly defending their position. To be honest, only time will tell how this will all play out, but we can look at a few key indicating factors that can help tone down all the hullabaloo.

Why Rates Will Go Up

There are a lot of fancy numbers and ratios that will cause this to happen, however, it’s much simpler than that. When you insure more people with more expensive medical conditions, you get more rate increases. More plus more doesn’t equal less.

The Affordable Care Act will require all health insurance companies to accept every person who applies for coverage, regardless of their medical history. That sounds like a good thing, and it is, just as long as you can still afford the coverage in the process. If insurance becomes more unaffordable for more people, that is still just as big of a problem as more people not getting insurance for having more problems. You are essentially trading one problem for another.

Why the Insurance Companies Might Be Right

Like Shark Tank’s Kevin, Mr. Wonderful, O’Leary, if it’s one thing insurance companies know, it’s money. Their entire business exists primarily on the exchange of money. They know exactly how much money they need from you to pay for billions of dollars worth of unpredicted medical procedures for everyone else. With the 80 percent loss ratio, which requires companies to use 80 percent of premiums on health benefits and the remaining 20 to run the company, it’s nearly impossible for them to charge you more than is necessary. If they do, they have to issue a rebate at the end of the year.

Why the Government Might Be Wrong

People like to point to Medicare and Medicaid as successful examples of why the Government knows how to run an insurance program. That’s a true statement, in a vacuum. Medicare and Medicaid get to play by a different set of rules. In 2008, Medicare reimbursed doctors only 78 cents for every private insurance dollar, according to The Health Affairs Blog’s Dr. James Rickert. Basically they have created their own 20-25 percent discount. It’s like being the banker in Monopoly and changing the value of the currency for one player and not the rest.

More plus more does not equal less.

Even if the Government is Right...

If health insurance plans do become more affordable in 2014, it will only be for the people who qualify for tax credits and subsidies through the exchanges. Which from what we know, will require you to continually verify your eligibility according to a handful of benchmarks. Again, this should be a good thing, but these tax credits and subsidies have to come from somewhere, I don’t think the U.S. Government is going to hold an annual bake sale or car wash to raise these funds. Regardless if you think that might not be a bad idea, since our deficit is around 16 trillion dollars.

What This Means For You

As you can see, the Affordable Care Act is not as affordable as it might lead you to believe. A more appropriate name might have been the Guaranteed Access Act, since the law’s crowning achievement will be to provide everyone in the country with the ability to get health insurance, no questions asked.

Asking a health insurance company to buy your protection without knowing anything about you, is like buying a house without looking at it. You want to know when the roof was replaced, if the floors are in good condition and if the wiring has been updated. You want to know what is wrong (how much money you need to put in it) before you agree to buy it.

The Bottom Line

As I have said before, providing everyone with guaranteed, quality, affordable health care and health insurance is a necessary goal, let’s just hope we get the affordable part right.

Which side are you on? How do you think the Affordable Care Act will impact the cost of your health insurance?