Location and Income Determines Premium Rates
The Affordable Care Act requires health insurance companies to pay between 80 to 85 percent of the premiums they collect on direct healthcare expenses. In order to make a profit, health insurers will need to focus on insuring as many people as possible to remain profitable, so they plan to focus on participating in the exchanges in large urban areas. While consumers will have a minimum of two insurers from which to choose a health plan in the health insurance marketplaces, those who live in rural areas and less densely populated states will likely see higher premiums than those who live in states with large urban centers (Ableson, 2013).
One of the provisions of the Affordable Care Act to keep insurance premiums affordable for the individuals is to offer subsidies to offset the cost of premiums and to provide small businesses with less than 25 employees with Small Business Tax Credits (Faler, 2012; Amato & Schreiber, 2013). Unfortunately, both of these forms of assistance are on sliding scales, which mean for many, the cost offset will be minimal. For example, 40 percent of Americans will not be eligible for subsides, and people whose income is 350 to 400 percent will only receive a subsidy of 13 percent (America's Health Insurance Plans, n.d.)
The issue of whether the Affordable Care Act will make health insurance affordable will depend on a variety of individual circumstances. Just like Medicare, lawmakers are likely to modify aspects of the Affordable Care Act, which will hopefully increase American’s access to affordable healthcare.