Sunday, October 20, 2013

The New Normal

Under the old rules, the underwriting rules we’ve lived by for decades, health insurance premiums were determined by risk.  Healthy people paid less than those that weren’t.  We asked questions such as:

Do you smoke?
What is your height and weight?
What medications do you take and why?

The new rules under the Patient Protection and Affordable Care Act (PPACA) eliminate underwriting.  The new rules have us charging everyone the same premium regardless of health.  The only questions now are:

Do you smoke? (old habits die hard)
How old are you?
Where do you live?

How is that working?

Angie (name changed) is a 55 year old owner of a successful home-based business here in Greater Cleveland.  She purchases her own health insurance.  Angie is not a preferred risk.  Her $4,000 deductible HSA (Health Savings Account) policy was not rated Tier 1.  Nor Tier 2.  Tier 3.  Tier 4.  She wasn’t rated Tier 5.  Nor Tier 6.  Tier 7.  Tier 8.  Not even Tier 9.  Angie, a few years post-surgery, was issued, after intense negotiations, at TIER 10.  Her current premium is $482 per month.
How much will her premium be under the new system, a system that doesn’t ask health questions and doesn’t factor in previous illnesses?

HSA Qualified Policy                                        Premium

  $3,000 deductible                                           $518.41

  $6,000 deductible                                           $369.63

Those numbers are real.  Tier 10 is the new normal.
The new 2014 policies would provide Angie coverage for maternity, though at 55 she’s willing to accept that risk.  Her current policy, issued in 2013, already has preventive care and an unlimited maximum benefit.
Much to the chagrin of some of the bureaucrats in Washington and the advocates around the country, the insurance companies, billion dollar corporations, understood who will be applying for health insurance in the next few months.  The doors are being thrown open (well, the exchanges will work eventually) and these are the first applicants:

Our currently insured who have been highly rated
High risk clients covered by  state mandated guaranteed issue contracts
Very unhealthy Americans who can't afford those guaranteed issue policies
These people need affordable health insurance.  More importantly, they need access to health care, but the PPACA does not necessarily meet that need.  Many of the very people this law was meant to serve were surprised when I told them the price.  Some were expecting free.  Almost everyone thought for sure that the premium would be less.
The insurers have no interest in losing their existing clients. For some reason the people pushing the PPACA, the government and the advocates, thought that the insurance companies would dump their entire book of business into the new insurance pools.  Sure this might allow the new clients to pay less initially, right up until all of the young and/or healthy dropped their coverage.  Then what?
Local insurers – Medical Mutual of Ohio, Anthem Blue Cross, UnitedHealth One, etc… - are offering their existing clients an opportunity to renew their policies as of December 1, 2013.  Sign a form and you get to keep your current policy until next December.  What happens in December 2014?  G-d only knows.
This is survival.  The insurers are stocking the pond.  In an effort to attract more 2013 business, major insurers have adjusted their underwriting.  Anthem blue Cross has suddenly decided that maybe smoking isn’t that bad.  Other companies have made similar short term changes.
Are you paying attention?  If you are going to qualify for a major subsidy, if you are suffering from a serious, expensive to treat illness, or if you have had a debilitating accident, you may be significantly better off thanks to the PPACA.  But if none of the above apply to you, then there is still a little time left to get in under the old system, to play by the old rules, to pay premiums based on your risk.
You have a small window before you become a part of the new normal.


Sunday, October 6, 2013

Plotting Your Escape From The PPACA

William was damned near ecstatic. My client had a right to be. William is a 57 year old self-employed Republican pragmatist. He is also very unhealthy. There are no imminent threats. He just suffers from the kinds of things that causes health insurance companies to run away. William’s current health insurance, a $5,000 deductible HSA qualified contract, is $1,055 per month. On January 1, 2014 his premium plummets to $404.

William is now a huge fan of the Patient Protection and Affordable Care Act (PPACA). And if you, like Bill, are paying a lot of money for your health insurance due to your significant health problems, then the new law may save you a lot of money, too. Today’s blog is not for you.

Today’s blog is for those Americans who are reasonably healthy, do not need maternity coverage, and have an income above 400% of the federal poverty level. This is also a post for those people who will not qualify for a federal subsidy for a number of other reasons. The following will actually be relevant for a lot more people than you might think.
Today’s blog post includes numbers. Lots and lots of numbers. Stay with me. This is your money.

The exchanges opened October 1st. There have been, predictably, significant computer issues that will be resolved in time. Some of our insurers are still trying to get their policies and applications approved. I have been advising my clients to ignore the new system until November 1st.

I finally received Medical Mutual of Ohio’s 2014 rates. We don’t have applications, just rates. Here is how the PPACA affects a healthy 58 year old who happens to be fond of a good cigar (ME!).

Current Policy - $5,000 deductible HSA qualified contract - $310 per month

New 2014 Policy - $6,000 deductible HSA qualified contract - $633 per month

If you will bear with me, I will give you a more complete look at some real numbers. The following is a Medical Mutual of Ohio policy, $6,000 HSA qualified contract, for a non-smoker. The 2013 rates assume the insured is healthy. We no longer care in 2014 as we begin to utilize community rating.

                     2013                                                                        2014
            Male          Female                                                  Male and Female
22     $ 55.21         $ 75.43                                                        $166.75
42        92.68          135.67                                                          219.62
62      244.92          254.09                                                          476.20

Community rating is great if you are the sickest guy on your street.
All of these policies, new in 2013 and new for 2014, cover preventive care at 100%. The 2014 policies also cover maternity the same as any other medical condition. But if you don’t have a serious pre-existing condition and you don’t need maternity, you don’t need one of the new 2014 policies.

How do you escape the PPACA if it isn’t going to help you? Get coverage now! A policy purchased now, effective now, eludes the PPACA till the end of 2014. What will we do a year from now? I don’t know, but I would rather save $3,600 over the next year and see what develops.

The Department of Health and Human Services (HHS) has been forced to create this on the fly. Let’s give them an extra year to get this right. If you allow yourself to be victimized by the PPACA, it is your own damn fault.