Under the new health care reform law, will insurance premiums increase or decrease? It’s a tough question. In the news, we’ve seen health plans for various states’ health insurance exchanges coming in lower and higher than expected. In Wisconsin, plan costs for the exchange haven’t been revealed yet.
Beginning in 2014, insurance companies must provide coverage to anyone who applies (see our previous post on guaranteed issue). The Affordable Care Act (ACA) sets limits on how much a person can be charged so that one group of people isn’t charged excessively compared to another group. This means that rates will likely change.
Today, federal law doesn’t place any limits on how insurance companies set their premiums. The ACA changes this starting Jan. 1, 2014. Under ACA rules, health plans can only adjust premiums based on these factors:
- Individual vs. family enrollment. Rates can vary based on who is enrolled in the plan. For example, an individual rate might be different than a rate for an individual and his spouse or an individual and all of his dependents.
- Geographic area. Health plans may cost more for people who live in areas where medical costs are high.
- Age. Rates can vary depending on age, but are limited by a 3:1 ratio. Older adults cannot be charged more than three times the rate of a younger person.
- Tobacco use. Insurance companies can charge tobacco users more. However, those who use tobacco products cannot be charged more than 1.5 times the normal rate.
Starting in 2014, the major factors that insurance companies use today to calculate premiums will no longer be allowed. So your health status (including pre-existing conditions), use of health services, and gender cannot be used to adjust your premium. One note here is that employment-based health plans will be allowed to charge workers up to 30% more on their premiums if those employees don’t participate in a wellness program or meet specified health goals.
Because of these limits, rates for insurance plans will likely increase for most people. However, the rates may no longer vary as widely as they do today. As premiums come into step with the new regulations, some who previously had higher premiums may see some relief while most populations that had lower premiums may see increases. For example, older people may see slight decreases in their premiums. Younger, healthier people ages 21 to 29—men especially—may see overall rate increases of as much as 42%.
The ACA restrictions are a minimum, so states are free to use them or enact even tougher standards of their own.
To find out more about health insurance premiums and other ACA-related topics, take a look at our Learning Center or check out our free brochure, 9 Things You Need to Know About the Affordable Care Act.