How to figure out the Affordable Care Act as an individual

As the clock ticks down, most people are completely in the dark when it comes to setting up their health insurance under the new “Obamacare” rules.  I hope this sheds some light on the situation for people who currently have individual insurance.

If you purchased your health insurance before March 29th 2010, your plan is considered “grandfathered”.  Your group had to answer health questions in order to purchase the policy, and the rate you pay is based off the claims experience within that group. The good thing about having a “grandfathered” plan is that your rate will not be affected by the new health insurance pricing rules that are set to begin in 2014.  

A “non-grandfathered” plan is any policy purchased after March 29th, 2010. The biggest changes for non-grandfathered plans are that the rates these people pay will adopt the “Obamacare” rules in 2014.  There are 2 major rate changes that you should be aware of.

1) No health questions asked:

This is pretty straight forward.  Let’s say that you pay $100/month because you do not have any pre existing conditions, are a non smoker, and in relatively good health.  A person with the same demographics (age, gender, zip code) who has high blood pressure, anxiety, high cholesterol, is overweight, or has any other pre existing condition would be charged $500/month for the exact same policy.  This is because there is a greater likelihood that the second person will need more coverage and is a higher “risk”.  What will happen in 2014 is that both of these people would pay $300/month.  The person on one end of the scale increases to help offset the other end.  This obviously benefits some people and is a negative to others.  

2) Less sensitivity to age:

Much like our first example, insurance companies use your age to determine your rate.  As we get older, the likelihood of using your policy increases.  It only makes sense that if you buy a policy at 50, the price will be higher than the same coverage at 25.  Before 2014, premiums really started to escalate because of age at age 55 and up.  For example, an identical policy bought at age 21 would be $110/month compared to $700/month if that same policy would be purchased at age 60.

 Starting in 2014, the new health care reform will limit the difference in price that insurance companies can charge based on age.  Insurance companies won’t be allowed to charge an older adult more than three times the rate of a 21 year old.  So in our example, if a 21 year old’s plan is $110, then the 60 year old’s premium can be no more than $110 x 3 = $330.  So what happens?  The younger person’s premium is brought up to the midpoint in order to offset this rule change while the older person’s premium is reduced.  Young people (under age 35) will really feel this change!  If you are 55 – 64, this benefits you quite a bit.

Now, back to grandfathering.  If you bought your current individual policy before March 2010, your premium is NOT subject to these new rules.  It will continue to be priced under the old model for now.  In other words, your current policy will NOT be affected once the new laws are enacted if you purchased it before March 2010.

If your plan is NOT grandfathered, then your premium will be based off of these new rules starting in 2014.  The feedback I have received is that your premium will adjust on your anniversary date or the month that you actually bought your insurance.  So if you bought your insurance March 1st 2012, then you may get some sticker shock in March 2014.   

So….. How do you benefit?

First, you need to find out if you plan is grandfathered.  The easiest way is to call the customer service number (which should be on the back of your ID card) and simply ask them.  If your plan is grandfathered, I would think long and hard about dropping that plan for a new plan especially if the rates are pretty close in cost.  Obviously if there is a massive cost savings that is different but if the plans are pretty equal, I would tread cautiously.  If someone is under 35 and has a grandfathered plan, they may want to hold on to that plan for the time being.  The older a person, the more likely it is that they will benefit from these new pricing rules.

If you find out that your plan is NOT grandfathered, some insurance companies are allowing you to renew your policy effective 12/1 for 2014.  This allows you to bypass entry into the new rating system until the end of 2014.  If you compare your current insurance to what you can get via an exchange or “Obamacare” plan and you find that there isn’t any cost savings offered by switching, then you may want to pursue this route.  Again this is based off of each individual insurance company and is a case by case situation.  However, if your costs are comparable, you may benefit from locking in your plan rate December 2013 for 2014.

If your plan is NOT grandfathered and your company will not allow you to lock in your rate early, you should investigate the new “Obamacare” plans starting in October.  Missouri decided not to create a state exchange so Missourians will use as the website to purchase exchange based plans.  NOTE:  This website is the official site for people who will receive premium assistance or subsidy.  

As a licensed insurance agency, The Steinlage Insurance Agency is ready and able to navigate this process with you, making sure you understand your options fully and receive the best possible plan for your needs.  Please contact me today to discuss your options!

Karl Steinlage


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