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The entire raison d’être of the Affordable Care Act is to provide Americans with access to quality healthcare services at a reasonable cost. To achieve this goal, the legislation relies primarily upon private health insurance companies to provide benefits that cover the bulk of the cost of medical preventive, diagnostic, and treatment services.
According to the Kaiser Family Foundation, 18 percent of Americans found themselves among the ranks of the uninsured in 2011 (Kaiser Family Foundation, n.d.). The reasons people forego health insurance include the high cost of premiums for both employer-sponsored and private insurance plans, and not being able to purchase health insurance coverage due to pre-exiting conditions. Reform of the practices of the health insurance industry, the employer mandate, and the individual mandate established by the Affordable Care Act were designed to rectify the cost barriers to health care. As state and federal agencies implement the provisions of Affordable Care Act, it remains to be seen if the legislation will achieve its intended purpose.
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States Opting Out of the Medicaid Expansion Leaves Millions Uninsured
One of the key tools the Affordable Care Act used to provide access to health insurance coverage for low income American was to require the state to expand Medicaid eligibility to adults whose annual incomes are less than 133 percent of the Federal Poverty Level (FPL). Twenty-six states challenged this mandate, and in June 2012, the U.S. Supreme Court ruled that the Medicaid expansion requirement was unconstitutional and states could opt out of broadening Medicaid eligibility requirements. As a result of this decision, as many as 31 million people will not be able to afford health insurance (Bau & Appleby, 2012).
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The Young Invincibles to Pay Higher Premiums
To address the health insurance industry’s concern that the Affordable Act prohibition on denying coverage to people with pre-exiting health conditions would cause the cost of premiums to skyrocket, the ACA require all adults over the age of 18 to purchase health insurance. By expanding the risk pool to include young adults, health insurance companies can offset the cost of services of those with chronic health conditions and older adults who need more health services than younger people do.
Currently, many young people, often referred to as the “invincibles,” opt not to carry health insurance coverage because they are healthy and do not see the added expense as necessary (Kennedy, 2013). Although people under 30 will have the option to buy health insurance coverage, compliance with the individual mandate will mean a new expense. Since the penalty for not carrying insurance, which will be $95 in 2014 and increasing to $695 in 2016 for individuals, is less than the estimated cost of the premium, the Congressional Budget estimates that six million people will decide to pay the penalty instead of obtaining health insurance (Kaiser Family Foundation, n.d.; Congressional Budget Office, 2012). With the smaller risk pool, insurers are likely to raise rates.
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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.
- Amato, N., & Schreiber, S. (2013). Small Business Struggle to Navigate the Provisions of the Health Care Law. Journal of Accountancy, 38-43.
- America's Health Insurance Plans. (n.d.). Time for Affordability: Fact Sheet What You Need to Know Premium Subsidies. http://www.ahip.org/Issues/January-1-2014-Provisions.aspx
- Bau, J., & Appleby, J. (2012). Justices Uphold Individual Mandate, Set Limits On Medicaid Expansion. http://www.kaiserhealthnews.org/stories/2012/june/28/supreme-court-upholds-individual-mandate.aspx
- Congressional Budget Office. (2012). Payments of Penalties for Being Uninsured Under the Affordable Care Act. http://www.cbo.gov/publication/43628
- Kaiser Family Foundation. (n.d.). Health Insurance Coverage of Nonelderly 0-64. http://kff.org/other/state-indicator/nonelderly-0-64/
- Faler, B. (2012). Unaffordable Cost Seen for Some Under Affordable Care Act. Retrieved from Bloomberg: http://www.bloomberg.com/news/2012-11-29/unaffordable-cost-seen-for-some-under-affordable-care-act.html
- Kennedy, K. (2013). Health Insurers Fear Young People Will Opt Out. http://www.boston.com/lifestyle/health/2013/07/05/health-insurers-fear-young-people-will-opt-out/0AMHQuD1C5O6mBbXxOn47H/story-1.html
- Kaiser Family Foundation. (n.d.). The Requirement to Buy Health Insurance Under the Affordable Care Act. http://kff.org/infographic/the-requirement-to-buy-coverage-under-the-affordable-care-act/
- Ableson, R. (2013, June 2013). Choice of Health Plans to Vary Sharply From State to State. http://www.nytimes.com/2013/06/17/health/choice-of-health-plans-to-vary-sharply-from-state-to-state.html?pagewanted=all&_r=0