Under the Affordable Care Act (ACA) or” Obamacare” health insurance companies are required to offer coverage to all people and businesses. This is called guaranteed issue and has helped a lot of Hoosiers.
With Guaranteed issue, the ACA requires health insurance companies to use community ratings for Individual and small businesses. This is where the insurance companies charge premiums that are not based on the health history of the Insured. This used to be called underwriting. Now health Insurance companies must base rates off of a group or people. This is called a risk pool. By pooling a group of people together, healthy people should help to offset the cost of unhealthy people. Then the risk and costs are shared by the entire group.
The ACA introduced rules for community ratings. The insurance companies now base rates on age, tobacco use and geographical location. The ACA limits how much the coverage can cost. The highest rate can’t be more than 3 times the lowest rate. Indiana is able to keep Individual and small business risk pools separate. The rates are based on the entire risk of the pool. The ACA is does not allow the insurance companies to create separate risk pools
The Impact on Indiana Health Plans
With the removal of underwriting, we are seeing large rate increase in both the individual and small group markets. There are many reasons why we are seeing the rate increase. One of the biggest impacts is there is no underwriting. In the past, health people had better rates because they had less risk. Now the healthy people are in the same risk pools as unhealthy. Then we add in that highest premium can’t be more than 3 times the lowest. Young healthy people are seeing a very large rate increase under the ACA plans.
What are the options to reduce costs?
On Individual plans, it is worth looking at the exchange to see if you qualify for tax credits. If you do qualify for tax credits, then this will be your best option for coverage. If don’t qualify for tax credits, then you may want to explore a health saving account.
On Small group plans, If your group has more than 10 employees, you may want to explore an underwritten plan. These plans may be a self funded option, Associations, or even a PEO. If you have a healthy group plan, these may be your only options to control health premium.
At Nefouse and Associates, we are a company that will help you navigate the Exchange site and find the best insurance plan for you!
If you have any questions, get in touch with us! We’ll be glad to help.