My simplistic approach to downside cost of Healthcare Insurance going forward...

[LARS]

As I figure it, whenever the President and Congress get around to doing whatever they are going to do to the healthcare insurance market, the worst case scenario ought to be basically the unsubsidized cost of a current plan today on the Exchanges.

Indeed, ought to get better as I presume if nothing else high deductible plans will be readily available again.

What am I missing (again worst case scenario now that pre-existing appears to be firmly off the table)?

 

[FUEGO]

You're missing the escalating costs of a health insurance death spiral. If we keep the pre-existing condition clause of ACA, then we have guaranteed issue health insurance. Further, if insurers can't underwrite (aka set premium based on risk factors like pre-existing conditions, weight/height, etc) then it's a one size fits all premium. The healthiest will forego expensive insurance while the sickest will sign up. Repeat for a few years and the premiums will keep going higher as your pool of insured gets sicker on average. Adverse selection.

The risk to you is that you're in above average health but the premiums are set based on a very sick pool of insureds. You either pay the going rate or go uninsured.

I make no guess as to whether we would keep the pre-existing condition clause of ACA AND simultaneously disallow underwriting. As someone in the insurance industry told me, legislators aren't thinking like actuaries when drafting bills.

 

[LARS]

That with pre-existing you will not be denied insurance but you will pay astronomical cost?

That prices will go further up at even faster pace? Maybe that you will have Paul Ryan Medicare cuts?

Pre-existing is already priced into Exchange policies (we can debate whether more adjustment is needed, but it is already reflected in premiums).

As I think further on it, pre-existing is not the issue, but keeping pre-existing without requirement to purchase by healthy should cause some upward pressure on rates as insurers lose some of that income. No clue how to quantify that impact...

 

[eta2020]

Well if you live in Massachusetts which has uninsured population of 2.8% (lowest in Nation) and states health care laws then worst case scenario is probably quite manageable. This is achieved via Mandate since penalty is stiff 50% cost of cheapest insurance available for taxpayer. (based on age etc etc).

Our State Laws will kick in if ACA is gone

 

[LARS]

You're missing the escalating costs of a health insurance death spiral. If we keep the pre-existing condition clause of ACA, then we have guaranteed issue health insurance. Further, if insurers can't underwrite (aka set premium based on risk factors like pre-existing conditions, weight/height, etc) then it's a one size fits all premium. The healthiest will forego expensive insurance while the sickest will sign up. Repeat for a few years and the premiums will keep going higher as your pool of insured gets sicker on average. Adverse selection.

The risk to you is that you're in above average health but the premiums are set based on a very sick pool of insureds. You either pay the going rate or go uninsured.

I make no guess as to whether we would keep the pre-existing condition clause of ACA AND simultaneously disallow underwriting. As someone in the insurance industry told me, legislators aren't thinking like actuaries when drafting bills.

Perhaps I should've qualified my question as a near term one. In other words, from the perspective of someone nearing Medicare age.

 

[gauss]

The big flaw that I see in your analysis is the assumption about the premiums you will pay. If we return to individual medical underwriting, especially if you get really sick, and live in a loosely regulated state your premiums could go through the roof.

Your rate, in general, would no longer be the average of all the others in your zip code, like the ACA rates (except adjusted for age, smoking status and family size).

An example of a worse case scenario, in a loosely regulated state, the insurance company could perhaps set your premium as the average of your claims over the past 3 years plus admin fees.

My worse case scenario would be to be sick enough to qualify for Social Security Disability. After 25 months of this status I would be able to get Medicare at an early age (unless group employer health insurance is available).

Another scenario, under the old system, would be to move to a community-rated state such as NY. Your rates would not then be individually medically underwritten. The problem with this scenario is that if Insurance companies are allowed to sell across state lines, then, eventually as the word gets out, the healthy people will buy out of state medically underwritten policies leaving only the sick in the community rates in-state plans thus driving them out of existence.

Conceptually it is no longer insurance if you let people participate under different sets of rules.

I may start a thread inviting the actuaries and others to describe how the state regulation of insurance functions.

-gauss

 

[gauss]

Well if you live in Massachusetts which has uninsured population of 2.8% (lowest in Nation) and states health care laws then worst case scenario is probably quite manageable. This is achieved via Mandate since penalty is stiff 50% cost of cheapest insurance available for taxpayer. (based on age etc etc).

Our State Laws will kick in if ACA is gone

And if the Feds preempt MA state law and allow your residents to buy cheap out of state medically underwritten policies do you think that your MA plans will survive?

-gauss

 

[eta2020]

And if the Feds preempt MA state law and allow your residents to buy cheap out of state medically underwritten policies do you think that your MA plans will survive?

-gauss

But MA has actually one of the highest incomes per capita and one of the lowest ACA rates in USA. Interestingly this is coupled with one of the best hospitals in USA.

I hope people from for example Arizona, Mississippi or Luisiana will not be allowed to purchase insurance in MA.
Which I would imagine they will be not be allowed unless they buy it at different rate.


http://kff.org/health-reform/issue-...able-care-acts-health-insurance-marketplaces/

 

[LARS]

The big flaw that I see in your analysis is the assumption about the premiums you will pay. If we return to individual medical underwriting, especially if you get really sick, and live in a loosely regulated state your premiums could go through the roof.

Your rate, in general, would no longer be the average of all the others in your zip code, like the ACA rates (except adjusted for age, smoking status and family size).


-gauss

As I stated assuming no pre-existing condition exclusions, then there will be no individual medical underwriting (as was case for most states pre-ACA). Again, the current Exchange policy premiums reflect the impact of that fact.

Or are you making a different point that I am missing?

 

[aida2003]

You're missing the escalating costs of a health insurance death spiral. If we keep the pre-existing condition clause of ACA, then we have guaranteed issue health insurance. Further, if insurers can't underwrite (aka set premium based on risk factors like pre-existing conditions, weight/height, etc) then it's a one size fits all premium. The healthiest will forego expensive insurance while the sickest will sign up. Repeat for a few years and the premiums will keep going higher as your pool of insured gets sicker on average. Adverse selection.

Fuego, are you suggesting that pre-existing condition clause and underwriting should be dropped/changed? I'd like clarification as I find hard to understand which way you're leaning to with this.

 

[Curmudgeon]

I think you're missing the fact that the existing premiums are based upon an individual mandate - that is, everyone has to carry insurance every year, regardless of health. If this goes away, the healthiest will drop out, and only sign up when/if they get sick. With less participants, but the same number of sick people, the average premium will go up (and up, and up.)

 

[eta2020]

I think you're missing the fact that the existing premiums are based upon an individual mandate - that is, everyone has to carry insurance every year, regardless of health. If this goes away, the healthiest will drop out, and only sign up when/if they get sick. With less participants, but the same number of sick people, the average premium will go up (and up, and up.)

You pretty much got it I did not want to spell this out.

That is why MA which is the only state with very strong State Mandate Law will not have insurance companies raising rates if ACA is gone.

It is also why it has low existing rates.

 

[daylatedollarshort]

What am I missing (again worst case scenario now that pre-existing appears to be firmly off the table)?

Worst case for us pre-ACA was the best we could get was a skimpy policy with $50K in premiums, out of network and out of pocket costs in one year. Of course medical costs have increased since then.

Our other alternative was high risk pool in California. The only way we could qualify was to go without any insurance at all for 6 months, then get on a 3 year waiting list, and if we ever made it into the pool there was a lifetime cap on benefits that would not have been high enough to cover even a single major accident, let alone a lifetime of medical bills. The Paul Ryan plan advocates high risk pools which means pre-existing condition would be back. Otherwise how could you end up in the high risk pool?

The ACA places limits on how much older people can get charged - no more than 3 to 1 of younger, healthier households' premiums. Before it averaged 5 to 1. Our insurance would go to $2.5K a month under 5 to 1 in premiums, if we are still insurable, and who knows how much more in five years. If we can't get insurance or it has lifetime caps, we'll have to look at other options like moving (maybe MA or out of the country if MA plans get superceded by federal law) or going back to work. Our worst case option is moving to an EU country or central America with affordable health insurance, and not being able to move back because Medicare ends up with no caps at all on our out of pocket or or has lifetime caps for insurance. I like where we live, but we would rather move than face the possibility of going bankrupt in our golden years due to medical bills, since that would not be an issue for us in any other developed country in the world.

 

[LARS]

I think you're missing the fact that the existing premiums are based upon an individual mandate - that is, everyone has to carry insurance every year, regardless of health. If this goes away, the healthiest will drop out, and only sign up when/if they get sick. With less participants, but the same number of sick people, the average premium will go up (and up, and up.)

Yeah, I already qualified my thinking with the post made above:

As I think further on it, pre-existing is not the issue, but keeping pre-existing without requirement to purchase by healthy should cause some upward pressure on rates as insurers lose some of that income. No clue how to quantify that impact...

 

[gauss]

As I stated assuming no pre-existing condition exclusions, then there will be no individual medical underwriting (as was case for most states pre-ACA). Again, the current Exchange policy premiums reflect the impact of that fact.

Or are you making a different point that I am missing?

I think you are confusing a ban on insurance companies not offering policies to those with pre-existing conditions (likely to survive) with a restriction on their ability to price for it.

FWIW I think many in the media must be missing this too.

When I use the term medical underwriting, I am referring to the practice of the insurance company individually determining your premium based on your medical history.

A limit on pre-existing condition exclusions does not imply a restriction on medical underwriting for individual premium determination.

If you have an essentially infinite nest egg available then the difference may be mute. That, however, would not describe most of us here.

-gauss

 

[LARS]

If we can't get insurance or it has lifetime caps, we'll have to look at other options like moving (maybe MA or out of the country if MA plans get superceded by federal law) or going back to work. Our worst case option is moving to an EU country or central America with affordable health insurance, and not being able to move back because Medicare ends up with no caps at all on our out of pocket or or has lifetime caps for insurance.

I recently mentioned to a friend the concept of MA move as a potential end run. She, like you it sounds, has a serious pre-existing condition so if medical underwriting does return (which again I think is highly unlikely) I told her to consider moving to MA.

Wonder how MA will feel about a lot of "sick" people moving to the state...

 

[Hamlet]

I think you're missing the fact that the existing premiums are based upon an individual mandate - that is, everyone has to carry insurance every year, regardless of health. If this goes away, the healthiest will drop out, and only sign up when/if they get sick. With less participants, but the same number of sick people, the average premium will go up (and up, and up.)

Yup. Trying to require that pre-existing conditions get covered while repealing the individual mandate will put the individual insurance market into a death spiral. Young, healthy people will decide that the insurance is too expensive. They will drop their insurance, thus driving prices up. Rinse, repeat, and eventually the only people in the market are very sick people paying astronomical rates. This was actually the state of the NY insurance market pre-ACA.

One partial fix is to cover pre-existing conditions only for people who maintain continuous insurance coverage. If you let it lapse, you're on your own. I've seen that in most of the replacement plans. The drawback will be that I think a whole lot of people will mess up at some point, locking themselves out of the insurance market.

Ultimately, I don't think we have any idea at this point what things will look like in a year. The stuff being said by the powers that be indicate that either the speakers don't understand basic insurance concepts, or they are confident that the public doesn't (a safe bet). We'll just have to wait and see.

 

[LARS]

I think you are confusing a ban on insurance companies not offering policies to those with pre-existing conditions (likely to survive) with a restriction on their ability to price for it.

When I use the term medical underwriting, I am referring to the practice of the insurance company individually determining your premium based on your medical history.

A limit on pre-existing condition exclusions does not imply a restriction on medical underwriting for individual premium determination.

If you have an essentially infinite nest egg available then the difference may be mute. That, however, would not describe most of us here.

-gauss

I understand your distinction. I am using no pre-existing condition as short hand for individual medically underwritten policies will not be allowed by insurance companies. I do not think medically underwritten policies will be coming back.

And once again, current Exchange policy pricing reflect that point. The only thing they do not reflect is increased cost due to the mandate for healthy to purchase insurance. And that as I have said, could/would increase premiums, but I haven't a clue how to quantify the magnitude.

 

[daylatedollarshort]

I recently mentioned to a friend the concept of MA move as a potential end run. She, like you it sounds, has a serious pre-existing condition so if medical underwriting does return (which again I think is highly unlikely) I told her to consider moving to MA.

Wonder how MA will feel about a lot of "sick" people moving to the state...

Pre-ACA the insurance companies were allowed to cherry pick only the healthiest applicants in the private market. People with minor conditions like medically controlled high blood pressure were denied policies. The insurance companies often used rescission to force even the once healthy out if they ever did get sick. I haven't been to a doctor in probably ten years so I don't think of myself as sick. However the insurance agents told me pre-ACA health issues I had from years and years ago permanently excluded me from ever getting around pre-existing condition clauses, pre-ACA.

The ACA outlawed rescission: " Insurance companies will sometimes retroactively cancel your entire policy if you made a mistake on your initial application when you buy an individual market insurance policy. Under the Affordable Care Act, rescission is illegal except in cases of fraud or intentional misrepresentation of material fact as prohibited by the terms of the plan or coverage."

 

[eta2020]

I understand your distinction. I am using no pre-existing condition as short hand for individual medically underwritten policies will not be allowed by insurance companies. I do not think medically underwritten policies will be coming back.

I can not now find an article discussing this, but possibility that insurance for people with pre-existing condition will sky rocket is very real and on a table.

Even you (shortly on Medicare) may be effected if Paul Ryan has his way and your get Medicare vouchers and start shopping for insurance on your own.

 

[gauss]

I understand your distinction. I am using no pre-existing condition as short hand for individual medically underwritten policies will not be allowed by insurance companies. I do not think medically underwritten policies will be coming back.

And once again, current Exchange policy pricing reflect that point. The only thing they do not reflect is increased cost due to the mandate for healthy to purchase insurance. And that as I have said, could/would increase premiums, but I haven't a clue how to quantify the magnitude.

I have to step out, but you might want to take a look at Paul Ryan's proposals from about 6 months ago. In the ~30 page document, on my reading, I found content in there about banning exclusions on Pre-Existing conditions and restrictions on premiums for sick people in different sections.

I will be very happy if any replacement has "group underwriting" characteristics.

I have been posting about this quite often during the past week and you are the first one to suggest that a ban on Pre-Existing conditions implies some type of community rating (ie the opposite of individual medical underwriting) on the premiums one pays.

Lars, I hope that you are right on this, but I need to see some more discussion on this.

-gauss

 

[LARS]

I can not now find an article discussing this, but possibility that insurance for people with pre-existing condition will sky rocket is very real and on a table.

They are the same issue: described differently.

The whole point of eliminating "pre-existing" conditions was to stop healthcare insurers from using it as a criteria for individual underwriting.

SO if medical underwriting comes back, then "pre-existing" conditions are back, which my assumption is that will not happen based upon what has been said to date by Trump.

 

[LARS]

I have to step out, but you might want to take a look at Paul Ryan's proposals from about 6 months ago. In the ~30 page document, on my reading, I found content in there about banning exclusions on Pre-Existing conditions and restrictions on premiums for sick people in different sections.

I will be very happy if any replacement has "group underwriting" characteristics.

I have been posting about this quite often during the past week and you are the first one to suggest that a ban on Pre-Existing conditions implies some type of community rating (ie the opposite of individual medical underwriting) on the premiums one pays.

Lars, I hope that you are right on this, but I need to see some more discussion on this.

-gauss

Heaven knows I could be totally wrong, but make no mistake if medical underwriting returns for indivdual pricing that means so has "pre-existing" conditions for all practicable purposes.

At this point, I think this is highly unlikely based upon Trump's remarks to date.

 

[eta2020]

Well you are asking about worst case scenario.

The only certain thing about Mr. Trump is that he is "highly unpredictable". Maybe ACA will practicaly pretty much survive as is with cosmetic changes. And maybe he will join with Paul Ryan and gut Medicare as well.

 

[MichaelB]

The thread is closed.

A reminder about healthcare discussions http://www.early-retirement.org/forums/f38/moderator-notice-11-11-2016-please-read-84123.html

Another reminder about E-R Forum posting guidelines. http://www.early-retirement.org/forums/misc.php?do=sknetwork&page=rules