Can’t Have Our Cake and Eat It Too: The ACA’s built-in rules have created a hefty price tag

Let’s face it, health insurance is not a sexy topic to bring up at any business meeting. It’s complicated, convoluted and constantly changing. It is one of the largest liabilities on a balance sheet. My conversations with the local business community and individuals under 65 revolve around the rising cost of health insurance and what is the best financial strategy for them and their company. Often, the fundamentals of the Affordable Care Act (ACA) are misunderstood – or worse – ignored until consumers need to use or even pay for their own medical insurance.

Question: Why is health insurance so expensive?

Answer: We cannot have our cake and eat it, too. Unfortunately, the rules built within the ACA have created a hefty price tag. Very simply stated, the ACA is a layered set of regulations that insurance carriers are required to follow to provide the public a qualified health plan (QHP).

The Marketplace:

The ACA is the platform for the uninsured to enroll in health plans for both individuals and small businesses. This venue, a.k.a. the marketplace, is facilitated by either the federal or state government. Since 2014, Michigan’s marketplace has been orchestrated by the federal government, known as HealthCare.gov.

Early on, the marketplace enticed small business owners to enroll in group plans using the Small Business Health Options Program (SHOP). Included was the opportunity to apply for a narrow tax credit, as long as the criteria were met. This was a short-lived and disappointing program. Today, SHOP is not available on Michigan’s federally facilitated marketplace (FFM).

Since the launch, individuals not covered under group plans must meet the qualifications in order to receive tax dollar support which “helps” offset heavy premiums. Funds are credited to the consumer as long as they continue to qualify and share compensation information with the FFM.

Why are rates so high?

At the top, QHPs must pack in and provide ample coverage for ALL essential health benefits (EHB). These big-ticket items include: ambulatory, emergency, hospitalization, maternity, newborn care, mental health, substance abuse, prescription, rehabilitative, habilitative, laboratory, pediatric dental, vision and last but not least, preventive care services.

Framed within preventive care are: vaccines, non-diagnostic colonoscopy (50+), mammograms (40+), birth control, wellness exams and more. These high-priced EHBs have been baked into the premiums, one important reason rates are so high. Familiarize yourself with the free-at-time-of-service items by asking your insurance carrier or agent for your plan’s preventive menu.

Two large and pricey layers of the ACA have established financial safeguards for the consumer. Current parameters not only stop insurance companies from limiting care, but also measures the amount of medical debt a person can afford annually. These limits are:

Lifetime: Health insurance carriers may not halt care when medically necessary treatments have surpassed one million dollars. Once upon a time, the patient was responsible for all costs that exceeded specific dollar thresholds. Since lifetime ceilings have been removed, insurance carriers are passing these potential expenses back to the consumer.

Annual: Medical debt is now indexed, measured and capped, annually. Eight years ago, the cumulative out-of-pocket allowed was $6,350. In 2022, this became $8,700. The math? Deductible + coinsurance maximum + diagnostic office visits + Rx copays = maximum consumer responsibility. If this sum is met, coverage moves to 100%. The carrier pays the remaining (until the program resets).  Learning these details is important. Know your QHPs maximum math!

Your Rates:

Said delicately, rates are based on age, not health. With small groups and individual QHPs, the older you are the more expensive you become (in the eyes of the ACA). Using rough arithmetic, adding a zero to your age is a decent indicator of what a bare-bones bronze plan may cost. Insurance networks (HMO, POS, PPO) and metal tiers such as platinum, gold, silver will affect the monthly rate. The more extensive your coverage, the more it will cost (+$100 per precious alloy). The math: At 62 budget $620 for an unsubsidized, bronze HMO plan. A gold PPO plan, at 62, could run as high as $920, per month, give or take.

Rates have managed to crest beyond affordable for many individuals and small business owners. By design, the ACA does provide abundant coverages and important monetary protections from the very institutions who help to keep us healthy. The way the ACA is stacked today, this cake is extremely expensive, no matter how you slice it!

Recently enacted transparency rules are one small but mighty catalyst that can provide the public much-needed price accountability when budgeting for non-emergent services. Skilled insurance agents, not pressured to meet quotas, should be sharing guidance and strategies to assist you when traversing through your health insurance decisions for yourself and your business.

Andi Dolan is the founder of Traverse Benefits, a locally-owned independent insurance agency providing health, life and disability insurance solutions for individuals, employers and Medicare beneficiaries across northern Michigan.

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