New HC rates with Obamacare

[2B]

I, for one, will not be paying for more coverage than I might have selected. My current coverage is expensive and it sucks. The new coverage I will be getting will be cheaper and more extensive.

I hope that is the case for you. I will also probably pay less than the Texas high risk pool. I have minor issues that preclude a non-risk pool plan and I'm older. I will be subsidized by the healthy and the young. I can't speak for your situation.

In fact, I will look at arranging my income to qualify for a subsidy so I'll be subsidized by the "wealthy" or, at least, those that are forced to show a significant taxable income. I probably have more weath than most of the people subsidizing me but the subsidy is based on income and not assets (for now).

 

[2B]

I think the main question is why should he get health insurance. The answer is because even 26 year olds aren't immortal and that medical bills in the US. for a serious illness or car accident can be over $1M a year.

A low income 26 year old would get a subsidized plan, and a 26 year old in my zip code making $47.5K would pay ~3K a year for a plan with a 2K deductible.

Your question is like why should I pay my property taxes now that my kids are out of school.

Most 26 year olds do think they are immortal. At least, they think they are not going to get seriously injured or contract some disease and if they do they'll get by. The ones with employer plans take it but those that don't will view it as a discretionary purchase.

A single 26 yr old making $47.5K (w/o employer plan) would pay about $8000 in federal income taxes and another $3500 in FICA/SS (all quickly estimated). Throw in state income taxes, student loans, car payment, taking his gf/bf to Cabo, rent, food, utilities, new iphone, etc and they might balk at $3K/yr for something they haven't used in their memory. There's a reason that young people don't buy insurance now. The ACA will, in general, raise the cost to them except for the very heavily subsidized.

Why do any of us pay our property taxes? In my case I would have a tax lien put against my property and it would eventually be sold on the steps of the county court house. I don't think many people get joy out of paying taxes hence the strong penalties against paying them. Anyone who thinks that our society would happily pay all their taxes if no penalties existed is seriously delusional. Just look at all the tax cheats and frauds that are discovered when serious penalties do exit.

 

[MichaelB]

If the young are not supposed to help subsidize the old, why does every article I read express concern that if the young do not purchase the health insurance, it will create a death spiral in premium costs where more and more people drop out if premiums rise from the lack of healthy youthful participants?
I would also agree that the intent is to have the healthy subsidize the unhealthy (though that is pretty much what insure is about anyways). Otherwise why would they eliminate the higher deductible plans that a healthy person would purchase that had plenty of assets to handle the deductible?

All insurance involves everyone paying, and some using. To call that a subsidy is an effort to shift the attention and portray it a certain way.

The insurance companies segment and price the individual market differently than the large group market. They currently define group by gender, age, region, state, and health condition, break them down into hundreds of segments, and price each differently. This [-]is a failed model because it[/-] excludes so many and is punitive on some that move between sub-group.

The large group market defines groups differently, with fewer segments and far less granularity. This market works much more smoothly for sponsors and users. The ACA is attempting to make the individual market work more like large group insurance, where the primary driver of difference in premium is coverage.

Individual group coverage will continue to define sub-groups with more segmentation. Age is still a factor, as is region. It is still critical shift, however, away from a model where the key driver of price is exclusion.

While many measures have already been fully implemented, it is fair to say that one key test is new enrollment. The key to success in not getting more young people to enroll, it is getting all people to enroll, and making the individual marketplaces more like a large group market.

 

[donheff]

The ACA is about many things, but young subsidizing old and healthy subsidizing sick are not among them. In fact, in the "other" insurance market, which includes group policies and covers about 90% of private insurance in the US, individual premiums do not differ because of age, health or pre-existing condition (in most cases). Premiums differ due to coverage. Insurers are not allowed to exclude, everyone can join if they are eligible members of the insured group, and all group members get the same price for the same coverage.

Price discrimination for the same coverage is present in the individual and very small small group market, the target of the exchanges, and covers around 10% of the marketplace. Even after all the ACA measures are implemented, policies in the exchanges will still price to age far more than most group policies. The discrimination is reduced but still exists.

If anything, the ACA is trying to make individual and very small insurance look more like the large group insurance. The question here is not why a grandfathered plan premium is rising, even when it is not implementing yet many of the ACA mandates. The real question is why is the current premium below the US average for group insurance, and what is changing within that policy to drive a price increase without a corresponding change in coverage.

The ACA does both of these things, I'm not sure why you write this.

If the young are not supposed to help subsidize the old, why does every article I read express concern that if the young do not purchase the health insurance, it will create a death spiral in premium costs where more and more people drop out if premiums rise from the lack of healthy youthful participants?

I think MichaelB has a good point even though others are correct that youth participation is important. This is insurance after all. The very concept is built on a broad pool of participants. The private sector group model with no age distinction only works because most policies are heavily subsidized by employers bringing the price within range for a broad range of employees.

It is frustrating to listen to talking heads on the news blab on about the young subsidizing the old as if this is a bad thing. There are many who argue that such cost shifting makes the program a bad deal for the young such that they should not enroll. But we don't hear them complaining that the work based programs (which are much more redistributive) are bad for the young. The fact is, we all need HI, young or old. That is why so many of us were overjoyed to be able to keep our kids on our group policies for a few extra years after college. A catastrophic illness or injury can strike anyone leaving them destitute if they have no HI.

 

[2B]

The insurance companies segment and price the individual market differently than the large group market. They currently define group by gender, age, region, state, and health condition, break them down into hundreds of segments, and price each differently. This is a failed model because it excludes so many and is punitive on some that move between sub-group.

The large group market defines groups differently, with fewer segments and far less granularity. This market works much more smoothly for sponsors and users. The ACA is attempting to make the individual market work more like large group insurance, where the primary driver of difference in premium is coverage.

I think you misunderstand how mega-corp group insurance works. Most companies self-insure and use an insurance company to manage their program. By custom, companies do not break out cost based on age or health condition but I'm not aware of any law preventing it. The typical breakdown is single, married, married with children. They did weed out serious health conditions by having a lifetime maximum which I've seen at $1MM and $2MM. I knew one person with a child with CP that was getting close to the $1MM mark and took a new job so he could start the clock over.

Smaller group policies where the insurance companies are actually assuming the payment risk are either bundled with other small policy holders and/or rerated every year so the insurance company makes a profit.

Without saying good or bad, the ACA added older "children" to the plans, added "essential" coverages and eliminated the maximum. All of these increased the cost to the companies and many passed on a portion of the additional costs to employees.

As for calling something a "failed model," that sounds like an opening to a political argument and has typically been suppressed by the moderators.

 

[pb4uski]

...."Why should I pay so much more than the true value of my coverage in order to subsidize that old, rich guy?" That's a great question. The short answer is: Those in power have passed a law that takes away your other options for insurance, they think this is best for you.

While I don't think it would convince the young guns to buy health insurance another angle would be that society has decided that in order to make health insurance affordable when you are old that you essentially pay more that what it costs when you are young to be able to pay less than what it costs when you are old.

I hate to mention it but it is sort of like permanent (aka whole) life insurance where you pay more than term rates when you are young to have the right to pay less than term rates when you are older.

The rub is, with whole life your right to buy for less when you are older is contractually guaranteed, whereas with health insurance it isn't.

 

[pb4uski]

I think you misunderstand how mega-corp group insurance works. Most companies self-insure and use an insurance company to manage their program. By custom, companies do not break out cost based on age or health condition but I'm not aware of any law preventing it. The typical breakdown is single, married, married with children.....

WADR, IMO it is outrageously disingenuous to suggest that MichaleB, of all people, doesn't understand how mega-corp group insurance works.

What you leave out is that in most cases, in addition to using insurers to administer their claims, these mega-corps also buy stop-loss insurance from an insurance company to protect them from excessive claims.

My guess is that there is less granularity of premiums in the group insurance market because it would introduce a degree of complexity that the megas haven't seen as necessary given the degree that the companies subsidize the cost.

 

[Jack_Pine]

So what are you supposed to do with ACA if you move from state to state constantly (ie, traveling around in an RV)? I haven't really seen a firm answer here.

It's an interesting question for a full timer. I understand a policy that is nationwide but what state would you buy it in if you have no state of residence? (since the plans are state based)

I know some folks who full time that have a stick house and some that do not.

 

[MichaelB]

I think you misunderstand how mega-corp group insurance works. Most companies self-insure and use an insurance company to manage their program. By custom, companies do not break out cost based on age or health condition but I'm not aware of any law preventing it. The typical breakdown is single, married, married with children. They did weed out serious health conditions by having a lifetime maximum which I've seen at $1MM and $2MM. I knew one person with a child with CP that was getting close to the $1MM mark and took a new job so he could start the clock over.

Smaller group policies where the insurance companies are actually assuming the payment risk are either bundled with other small policy holders and/or rerated every year so the insurance company makes a profit.

Without saying good or bad, the ACA added older "children" to the plans, added "essential" coverages and eliminated the maximum. All of these increased the cost to the companies and many passed on a portion of the additional costs to employees.

As for calling something a "failed model," that sounds like an opening to a political argument and has typically been suppressed by the moderators.

A little confused. My point is that large group insurance has far less segmentation than small. You are giving examples of the few segments seen in large groups. I would conclude we agree on that point. This difference in group definition is what drives such dramatic differences in pricing.

As for the failed model comment, there was no politics in that, but if it in some way offends you I will withdraw it, ask that it be ignored, and publicly express regret at having used it.

 

[pb4uski]

So what are you supposed to do with ACA if you move from state to state constantly (ie, traveling around in an RV)? I haven't really seen a firm answer here.

IIRC there has been mention in some threads that one needs to shop for a HI policy with nationwide coverage. I suspect that you would need to shop/buy from the exchange in your state of legal residence.

 

[2B]

I hate to mention it but it is sort of like permanent (aka whole) life insurance where you pay more than term rates when you are young to have the right to pay less than term rates when you are older.

The rub is, with whole life your right to buy for less when you are older is contractually guaranteed, whereas with health insurance it isn't.

I have only two data points on whole life. In my personal policy that I dropped years age, the premium was level but when young more of the payment went into "savings" because the insurance part increased with age. In my FIL's policy which he purchased at 65 (who knows why) also had increasing insurance cost with age but it did eventually flat-lined at the premium amount. I can't remember what his age had to be but he died at 89 without reaching it. So, reaching the level insurance cost that equals the premium would agree with your point but it's not applicable to most people.

I don't know if "modern" WL policies are level insurance. You could be right with more recent practices. I would think that would make buying WL even less attractive. When I bought (suckered in) WL, the big selling point was showing how fast the cash balance grew. Unfortunately, their projections weren't even close to the actual growth in the cash balance.

 

[MichaelB]

What you leave out is that in most cases, in addition to using insurers to administer their claims, these mega-corps also buy stop-loss insurance from an insurance company to protect them from excessive claims.

good point. Self insured does not mean no underwriting.

My guess is that there is less granularity of premiums in the group insurance market because it would introduce a degree of complexity that the megas haven't seen as necessary given the degree that the companies subsidize the cost.

The complexity does add unneeded cost. In addition, the law does not allow insurers to exclude or deny coverage to members of large groups, except under limited circumstances. No such prohibition exists in the individual marketplace. Narrowly defined insurance segments allow insurers to exclude with little constraint.

 

[pb4uski]

I have only two data points on whole life. In my personal policy that I dropped years age, the premium was level but when young more of the payment went into "savings" because the insurance part increased with age. In my FIL's policy which he purchased at 65 (who knows why) also had increasing insurance cost with age but it did eventually flat-lined at the premium amount. I can't remember what his age had to be but he died at 89 without reaching it. So, reaching the level insurance cost that equals the premium would agree with your point but it's not applicable to most people.

I don't know if "modern" WL policies are level insurance. You could be right with more recent practices. I would think that would make buying WL even less attractive. When I bought (suckered in) WL, the big selling point was showing how fast the cash balance grew. Unfortunately, their projections weren't even close to the actual growth in the cash balance.

I'm not sure what you had/bought (and am not sure that you know) but in any event, by definition whole life is where the policyholder pays a fixed premium for life (or in some cases up to a certain age, like in life paid up at age x) in exchange for $y paid to designated beneficiaries in the event the insured dies. An important feature is that as long as the policyholder pays the premium, the insurer is obligated to provide the coverage.

If the premium of your policy increased as you aged, it probably wasn't whole life insurance (at least not as typically defined). Since the cost of claims for a group of insureds increase with age, the fixed premium is designed to smooth out the cost which was attractive for people who needed insurance for a long period of time (hence the notion of "permanent" life insurance).

 

[2B]

If the premium of your policy increased as you aged, it probably wasn't whole life insurance (at least not as typically defined). Since the cost of claims for a group of insureds increase with age, the fixed premium is designed to smooth out the cost which was attractive for people who needed insurance for a long period of time (hence the notion of "permanent" life insurance).

I probably wasn't clear. In neither case did the premium increase with age. They were constant. The WL policies had two parts. The premium was divided into an amount that went into the cash balance that drew interest and a payment for the insurance.

Over time, the amount that was diverted to pay for the insurance increased. The amount put into the cash balance was reduced. The premium never changed. In my FIL's case at some age over 90, all of the premium would go into insurance and nothing would be added to the cash balance.

 

[pb4uski]

WL policies don't usually have two parts. It sounds like perhaps you had a WL policy and the "cash balance" was dividends that were held on deposit at interest (which is a common dividend option) and that at some point the policy was changed so that you no longer paid for the premium but the premiums were funded from current dividends with the excess of the dividend over the premium continuing to be held on deposit.

I suspect that the reason that the amount put into the deposit account declined has nothing to do with the cost of insurance or the age of the insured, but more to do with declining dividends given the decline in interest rates and that more of the dividend is needed to pay the premium.

 

[daylatedollarshort]

Why do any of us pay our property taxes? In my case I would have a tax lien put against my property and it would eventually be sold on the steps of the county court house. I don't think many people get joy out of paying taxes hence the strong penalties against paying them. Anyone who thinks that our society would happily pay all their taxes if no penalties existed is seriously delusional. Just look at all the tax cheats and frauds that are discovered when serious penalties do exit.

So you pay your property taxes because it is your own best interest to do so.

 

[2B]

So you pay your property taxes because it is your own best interest to do so.

Yes so don't confuse it with some overwhelming desire not felt by the majority of taxpayers to somehow meet their "social contract."

If taxes were made optional, I doubt much would be collected. More would probably be collected if people could direct what their money supported but there would never be close to enough to do all that is currently done with tax money. I don't think everyone thinks everything done by the government is in their own best interest to financially support. Hence, the negative consequences applied by our taxing entities. Avaiding those are typically in our own best interest.

Based on your comments, I assume you double pay your tax bills to show what a good citizen you are. My compliments if you do.

 

[Alan]

It's an interesting question for a full timer. I understand a policy that is nationwide but what state would you buy it in if you have no state of residence? (since the plans are state based) I know some folks who full time that have a stick house and some that do not.

I thought that even RV'ers had to have a State of residence when they filed their taxes.

Do the ACA plans not include PPO plans? I still have retiree group insurance from my previous employer in Louisiana and have to choose a more expensive PPO plan as we don't reside in Louisiana.

 

[daylatedollarshort]

Based on your comments, I assume you double pay your tax bills to show what a good citizen you are. My compliments if you do.

Sorry but I totally missed your point somewhere in there.

My point was that I pay my property taxes because it is in my best interest to do so, even though I don't have any kids in the public school system.

If I was 26 I would still get health insurance at the current exchange rates, at least a catastrophic or bronze plan, because it would be in my best interest to do so, regardless of how those rates are calculated related to age.

I pay income taxes even when GE may pay zero income taxes, not because I think that's fair, but because it is in my best interest to pay my income taxes.

 

[explanade]

If someone under 30 refused to buy insurance and they pay the penalty, the incurred serious medical bills, couldn't they enroll next year?

Of course, they might still have a big bill to pay but going foward, they'd be covered?

Or say they don't pay for 10-20 years and decide to enroll in their mid 30s or early 40s.

Is there anything in the law to discourage free riding for a decade or two?

Of course, they take the risk that they come down with a serious illness which drains their finances or by not physical exams or tests, they develop some condition which might have been caught earlier.

There are some people under 40 who think they'll never see Social Security or Medicare benefits that are being drawn out of their paychecks, so there's already some level of generational resentment.

Now, it's going to be beat on their heads that they have to buy health insurance to make it affordable for older people.

 

[2B]

Sorry but I totally missed your point somewhere in there.

My point was that I pay my property taxes because it is in my best interest to do so, even though I don't have any kids in the public school system.

If I was 26 I would still get health insurance at the current exchange rates, at least a catastrophic or bronze plan, because it would be in my best interest to do so, regardless of how those rates are calculated related to age.

I pay income taxes even when GE may pay zero income taxes, not because I think that's fair, but because it is in my best interest to pay my income taxes.

My point is that the government's power to inflict pain on me makes paying my taxes in my best interest.

I keep getting the impression that you believe that paying your taxes makes the world a happier place and that is what you consider your best interest. Your world would be even happier if you paid twice the required taxes.

I think it's a good idea to have catastrophic health insurance no matter what your age. Unfortunately, many people won't. Some will make finacial decisions and some will just not bother.

 

[daylatedollarshort]

I keep getting the impression that you believe that paying your taxes makes the world a happier place and that is what you consider your best interest. Your world would be even happier if you paid twice the required taxes.

I am not sure what I posted for you to come to that conclusion. I pay my taxes so I don't get in legal trouble or have my assets seized. That is what I mean by my best interest to do so.

I am fine with paying zero taxes, as long as I can do so legally. Actually we spend a lot of time with turbo tax trying to arrange our MAGI to find the optimal tax / health care subsidy / financial aid point for 2014.

 

[2B]

I am not sure what I posted for you to come to that conclusion. I pay my taxes so I don't get in legal trouble or have my assets seized. That is what I mean by my best interest to do so.

I am fine with paying zero taxes, as long as I can do so legally. Actually we spend a lot of time with turbo tax trying to arrange our MAGI to find the optimal tax / health care subsidy / financial aid point for 2014.

So, we're saying the same thing. We're in heated agreement. Damn, why can't the rest of the world get in line?

 

[marko]

Here's what I don't understand:

Does anyone believe that someone making $30K or $40K or $50K a year can come up with $3-4-5K for HC?? These are people who struggle to make the food bill every week, can't qualify for Medicare and will have to get a plan on their own..

HC here in MA is about $10-12K for a bronze family plan...

 

[pb4uski]

It seems that the new normal is that health insurance will cost you 10+% of your income if you don't work for an employer who more heavily subsidizes the coverage.