ObamaCare and your pocketbook

8/15/2013 9:55:40 AM

ObamaCare and Your Pocketbook
Omar Ezz, CFP

For the millions of people who have individual health insurance, the impending implementation in 2014 of the Patient Protection and Affordable Care Act (PPACA), popularly known as ObamaCare, is of great concern. The focal  points of this landmark legislation  is the mandate which requires every American to have health insurance and prohibits health insurance providers from denying coverage to anyone regardless of their current medical condition. The effects of these aspects of the new law on insurance premiums are not uniform. They will vary from state to state and person to person.

Where Obamacare hurts
In states such as Indiana, Ohio, and Florida, which are lightly regulated and do not require coverage to all who apply, people may see their individual health insurance premiums increase. This is due to the fact that individuals who could not previously get insurance for various health reasons will finally be granted coverage, increasing the expense to insurers and hiking premiums. By comparing a trade association's report of premiums for all plans available today with the average premium expected on the health insurance exchange being set up to comply with the PPACA, the state of Ohio reports that there will be an average increase in premiums of 41%.

Where it helps
In states like New York and California, policy holders may actually see their premiums decrease since these already require insurers provide comprehensive coverage to all who apply. In other words, the individuals who could not attain coverage in the aforementioned states are already in the insurance risk pool, so no new risk would have to be priced into insurance premiums. Also, ObamaCare’s individual mandate would expand the risk pool to many younger, healthier state residents who didn’t bother to get insurance in the past, resulting in lower premiums for those already insured.

Taking age and gender into account
 The effect on individual premiums will also depend on age and gender. A female in her 60’s may see her premiums decrease for an exchange-based plan, while a male in his 20’s may see his premiums increase. This is because the new law requires that women pay the same as men and older participants cannot be charged more than three times what the young pay.

On a bright note, for those who may end up paying higher premiums, the PPACA limits the amount people have to pay out-of-pocket for deductibles and co-pays to $6,350 and advocates have made the argument that it will provide more comprehensive coverage for American citizens. However, the long-term ramifications will not be fully understood until years after the law goes into effect. So, stay tuned.

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