Affordable Care Act Scene 2 - Insurance Premiums

Parent Cafe
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<p>Actually that is not how the age pricing works (at least not in California but I suspect it is the same every where else). If you compare prices for the same policy at different age levels, I think you will find that the increase is linear – that is, I think when I did it for the policy I was looking for, the cost of a policy went up $16 for each year. So there wasn’t an actuarial consideration of what to charge a 57 year old vs. a 30 year old – the rates were set by the whole pool, minimum for the 20 year old, maximum for the 64 year old, and then simple math to step up the rates for each year.</p>

<p>In other words, if the 64 year old can only be charged 3 times as much as the 20 year old, the insurance company just figures out what they need per policy to cover the whole pool . So, for example, they might create a policy that costs $700 at the high end, $233 at the low end, and increment it up by $10.60 for each year of age. So that gets the 20 year old paying $233, the 64 year old paying $700, - and at the half-way mark, a 42 year old is paying $466. That $466 is the age-median rate for the policy, but may or may not be the average per person policy cost, depending on the actual age distribution of policy holders. </p>

<p>But the point is, when the 57 year old charged $625, it is not because of what the care of other 57 year olds cost, it has to do simply with the math as applied to the whole pool.</p>

<p>I think this linear progression of policies is pretty much dictated by the regulation developed under the law – that is, I don’t think there is another way that the companies can do it. </p>

<p>It’s actually one of the things that I feel is a nice feature – as it gives me more of a sense of predictability of future rates. I realize that the rates can go up across-the-board, but it also means that my rate as a 59 year old is anchored somewhat by what the market will bear for selling insurance to 25 year olds.</p>

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Actually, I’ve been doing some research into legislative history, and you would be surprised at how many times bits and pieces of the law have already been tinkered with. Probably at least half a dozen times -typically this stuff happens under the radar where some “fix” or other is tacked on as a rider to another bill. </p>

<p>So I actually anticipate that stuff to continue. I think that indexing of the Cadillac tax is something that the could happen in conjunction with legislation to help fill the Medicaid gap, which is actually a very easy legislative fix - I could do it with the insertion of about 5-10 word - though I don’t know how the CBO weighs in (i.e., what those extra few words would cost). </p>

<p>But I do think that these are going to be the sorts of changes that come through the back door rather than the front – that it is, it’s a lot easier to push through minor amendments to specific provisions when no one is watching than to have it become the story of the day on cable news.</p>

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<p>Honestly, Goldenpooch, it’s not difficult to find accurate information about “what you are hearing.” </p>

<p>[The</a> Health Care Reform Bill Becomes Law: What It Means for Employers](<a href=“http://hiring.monster.com/hr/hr-best-practices/workforce-management/employee-benefits-management/health-care-reform.aspx]The”>Employee Benefits Management | Monster.com)</p>

<p>I would call to your attention the fact that small businesses (50 or fewer employees) are not required to offer insurance at all, and fully 90% of US businesses are thus exempted. [Small&lt;/a&gt; Business & Entrepreneurship Council](<a href=“http://www.sbecouncil.org/about-us/facts-and-data/]Small”>Small Business & Entrepreneurship Council). Of the large businesses, [Majority</a> Of Private Companies Already In Compliance With ACA Requirements](<a href=“http://insurancenewsnet.com/oarticle/2013/07/11/majority-of-private-companies-already-in-compliance-with-aca-requirements-a-386918.html#.UlsSujbn-Uk]Majority”>http://insurancenewsnet.com/oarticle/2013/07/11/majority-of-private-companies-already-in-compliance-with-aca-requirements-a-386918.html#.UlsSujbn-Uk)</p>

<p>We have this new thing called google. You might want to take it for a spin.</p>

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<p>I was out to dinner last night with several small business owners who employ more than fifty but less than 100.</p>

<p>They have moved to the part time model. They are liberals. They voted for Obama. They want to be able to work with this, but they simply can’t. They feel awful about it.</p>

<p>I think it’s sad when we don’t acknowledge that the reason that Unions want exemptions and the business mandate has been suspended is because this is a business hardship. It just is.</p>

<p>I’m not saying it’s “wrong,” just it is what it is.</p>

<p>I’m not saying I would vote a different way than the way I voted, democrat, just because my premiums have trippled. I wouldn’t have, for various reasons.</p>

<p>But it is annoying when people act as if this is just a silly concern, when we know it is not. Not for our kids employment future and not for other people’s kids, either.</p>

<p>This law is a massive change, financially, and there will be winners and losers. I suspect the winners will be those over fifty and the losers, as always, will be those in the younger generations.</p>

<p>So, if we could stop acting as if the law is perfect, which it isn’t by a long shot, and look at it realisitically, we can say, “yes, businesses have moved to a part time model. Part of the reason for this is the unintended consequence of the law labeling a full time job at 30 hours. This needs to be changed.”</p>

<p>Because for our kids and for their kids, that label needs to be changed.</p>

<p>I know too many business owners not to know this is the absolute truth.</p>

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<p>Crazy question, but here goes. </p>

<p>How much are these ACA policies allowed to increase each year? By that I mean, if a group policy costs a family of 5 $1200 a month with no subsidies in 2014, what hapoens each year?is it adjsted for inflation each year?</p>

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<p>Calmom, thanks for correcting me. So I was wrong, and the 57-year-old is paying for the pregnancies of 25-year-olds. But also, the 25-year-olds are paying for the heart attacks and emphysema of the 57-year-olds.</p>

<p>You’re right that given the entire risk pool for all ages, and given the fact that the oldest subscribers can’t be charged more than three times what the youngest subscribers pay, the prices for oldest and youngest are pretty much fixed. But I wonder if there is some opportunity for an enterprising insurance company, to price using some non-linear function interpolating the prices between the 21-year-olds and the 64-year-olds. The real function is not linear at all, so the enterprising insurance company might be able to get some business by pricing the premiums for the 40-year-olds more fairly. Instead of saying the prices go up like 1, 2, 3,4,5, Acme could make the prices go up like 1, 1.5, 2.5, 4.8, 5. If Acme picks off a lot of 40-year-olds, they can make the premiums lower for 40-year-olds.</p>

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<p>The ones sold by private insurance companies, on the exchanges? I have not heard that there is a limit, but the rule about returning excess premiums continues to apply.</p>

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<p>Samurai, if healthcare costs keep rising, the premiums will go up. There is no limit. However, for the subsidized it won’t matter, for everyone else, good luck.</p>

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This is a very intriguing issue and I plan to go into this in some detail on my blog – click my user name and then “Visit calmom’s homepage” to get there (but it’s not there yet, I’m still working on the article) - but here is my short answer:</p>

<p>As the law is currently written, every deduction listed at [26</a> USC § 62 - Adjusted gross income defined | Title 26 - Internal Revenue Code | U.S. Code | LII / Legal Information Institute](<a href=“http://www.law.cornell.edu/uscode/text/26/62]26”>26 U.S. Code § 62 - Adjusted gross income defined | U.S. Code | US Law | LII / Legal Information Institute) is preserved, so maximizing those deductions would be a good strategy to bring a higher “total” income down to a level that it qualifies for subsidies. I also believe that this is how IRS currently interprets the law.</p>

<p>However, I believe that this is due to drafting error in the law, because that was not how the law was worded when the PPACA was passed on March 23, 2010. Somewhere along the line, the law was amended to use the phrase “adjusted gross income” instead of “gross income” and it doesn’t look like that change was run past the CBO or that anyone was actually paying attention at the time. Suffice it to say that there was a very big change, fairly early on, on how the PPACA defined “household income” and I can not find any evidence that anyone was alert to it or talking about it at the time. So I don’t really know what is going to happen down the line. Maybe they don’t care, because it may be that the overall number of people who take advantage of their ability to stack deductions to reduce income and thereby qualify for subsidies is only a blip on the overall budget. </p>

<p>Here is my personal take: I think you should look at it the whole subsidy thing for what it is, a tax credit. Any good CPA will guide their clients to make decisions which maximize tax benefits within the law, so of course if you see that funding an IRA or taking out a PLUS loan in order to be able to deduct the interest is the ticket to making your family subsidy eligible – then go ahead and do it. But don’t count on it. Be prepared that somewhere along the line the law might be amended to take that money back – I think that Congress pretty much has all of 2014 to pass a law that would be effective when you do your taxes in 2015. </p>

<p>Do the math to figure out what your subsidy might be worth and what you have to do to get there – it’s pretty easy to see whether that is achievable with the various deductions for AGI or not. </p>

<p>For the self-employed, there is an easier way to “manipulate” the income which won’t be impacted by any changes to the law, and should be fairly easy for anyone at the margins of subsidy eligibility. Outside the margins, it’s not worth it – that is, it becomes penny wise and pound foolish when income is beyond the break even point between subsidy vs. no subsidy. That is, leaving aside the other deductions for purposes of analysis, it makes sense for an older individual with $48K income from self-employment to look around for a way to reduce their net down to $45K and get a subsidy worth more than the income differential. But if that individual could be earning $80K, then it would be silly for them to run up $35K of business expenses in order to claim a $5K tax credit. </p>

<p>But if it’s only a matter of a few thousand dollars, then I think that most self-employed individual earning at slightly above the 400% level for their household size ($46K, $62K, $78K, and so on) would find it fairly easy to run up enough extra business expenses to fill the gap. I think there are always things that self-employed people have on their wish lists - legitimate work related expenses that they didn’t make because money was tight. For now it might be a matter of delaying new equipment purchases into 2014. Near the end of 2014 it may be a matter of deferring income into 2015, which could be as easy as changing a billing cycle.</p>

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<p>** Moderator’s Note</p>

<p>Looking over the last two pages, I find that we have deleted more posts than we have allowed and this does not bode well for this thread being open. We have two ways to go, close the thread or stop some from posting.</p>

<p>I will start issuing citations to people whenever I delete a post going forward and start revoking their posting privileges when I delete them. So if you want to make sure you want to continue posting on CC, make sure you meet TOS to the dot. It is not relevant that you are responding to someone’s comment since that person will lose privileges too. **</p>

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I think the regs say no. I might be mistaken – but I did some digging around on that and I’m about 90% sure that there is a federal regulation that dictates how the age based premiums are calculated.</p>

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<p>“businesses have moved to a part time model. Part of the reason for this is the unintended consequence of the law labeling a full time job at 30 hours”</p>

<p>My sister just called me, horrified, with the latest change in her husband’s employer provided insurance for next year. He works for a large, very profitable company. Deductibles, copays and monthly premiums have gone way up. Last year the plan was extremely good, covered most everything for low cost/deductible. Next year, if you don’t stay in network, you may as well just pay out of pocket. Instead of 90%coverage, it’s down to 70 or 80%, for more cost.</p>

<p>So of course the company is blaming this on the ACA. They’ve tried to make benefits worse every year, but this year they really got their footing. They didn’t have to do this, they chose to, and found a very convenient excuse. While the ACA will of course cost them plenty of money, they will save a boatload more by lowering benefits so much. The employees at this company are getting a far worse deal, and nobody else is better off for it…this doesn’t help people who don’t have insurance, or who have prior conditions. This purely only helps the companies profit margin.</p>

<p>You can say, well, you can’t blame the ACA for this, it’s the companies fault for taking advantage. I suspect many others will follow. But a consequence is a consequence, that’s just reality.</p>

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<p>Texaspg, since I am new here, it’s hard to know when you’re crossing the line. Can you elaborate on exactly where that line is with regard to this topic since I don’t want to lose posting privileges? Are you saying that no opinions about the law or someone’s circumstances should be expressed?</p>

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<p>I’m confused by your reference to a “group” policy – the exchanges sell only individual policies (“group” policies are on the small business SHOP exchange) – but I am thinking you mean a shared household policy. (In insurance lingo, “group” has historically meant a policy that was rated toward a specific “group”, such as “all people employed by Costco”)</p>

<p>But the premium increases will be limited by cost factors. In April, 2014, all of the insurance companies will know how many people signed up on the exchanges in year #1, and as the year progresses they will be seeing numbers that will help them project on out what their costs are. The more healthy people who sign up, the lower the per-person costs will be for the companies, and they will adjust their premiums accordingly. </p>

<p>One new factor is the competitive pressure created by the marketplaces. Essentially they have to bid their premiums, not knowing what other companies will bid, but knowing that a much larger percentage of buyers will be comparison shopping than ever before. So if company A jacks up rates too high, then when the exchanges reopen in October 2014, there may be a lot of shoppers who go on line and choose company B instead.</p>

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<p>calmom, could you suggest where I should look to figure out how to calculate age-based premiums?</p>

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<p>Busdriver, do you realize how much better that new policy is than anything that is available on the individual market? The best ACA plans – platinum - are rated to pay 90% for in-network stuff (forget the out-of-network). The 70% that you find upsetting for out-of-network equates to the standard Silver plan for in-network . Bronze is 60%. </p>

<p>This really is the insurance equivalent of railing about the rising cost of caviar at the gourmet market. I understand that your sister still feels sticker shock, but the point is that what your family has been taking for granted is a different reality than what most people experience when it comes to health insurance.</p>

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<p>Goldenpooch - Your posts have been deleted and so have been some of the responses which means you are saying something or the other that is considered political, referring to moderation or other such violations. You should read terms of service to determine what is not allowed.</p>

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<p>Cardinal, just go onto an exchange with a fictional insured person, fiddle with the age, then do the math. What will it cost at age 20? 30? 40? 50? 60? The bottom of the range in the law is either 20 or 21 (I don’t remember which) and I believe the top of the range is 64. (At 65 we are supposed to be signing onto Medicare instead). </p>

<p>If you are asking about where to find the regulations, Google is your friend. You want to couple the phrase “code of federal regulations” with whatever you are trying to find out.</p>

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<p>If you’re right that the premium price increase has to be linear, calmom, then the 21-year-olds suffer, but the people in the middle age groups, the people 35-45 or thereabouts, suffer even more, in the sense that they are paying a higher difference between their actual costs and what they are charged.</p>

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<p>I realized that I could get the actual premiums by going on the exchanges with a fictional person, and I have an entire cast of characters that go over and visit the exchanges when I’m supposed to be programming. My question was more about where were the requirements mandating the linear progression of premium increases with age.</p>