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What Supreme Court Health Reform Rulings Means for California Residents

So we have a 5-4 decision in favor of most of the Health Reform law's provision with the biggest question mark...the individual mandate being upheld.

Needless to say, all the pundits are out in force discussing the macro level effects of this outcome but the language rarely gets down to how the California health insurance consumer might be affected.

That's where we come in so let's look at what we can expect now that Reform has passed Supreme Court muster.

In the end, Californians want to know how the bill will affect their pocketbook and health insurance coverage.
Many of the more popular and less costly features which have already been implemented will continue as is.

In this camp, we include the preventative benefit coverage, guaranteed issue for children, and dependent children being able to remain on a family plan till age 26.

These are pretty well received even within the health insurance industry so there's not much controversy there. Ultimately, the costs are built into the recent rate increases for most of these although the guaranteed issue for children will likely have a "longer tail" effect.

Grandfathered plans are not affected by most of these changes which is why you will find it difficult to get lower rates on the market if your plan was started before 3/23/2010.

Those plans do not have the mandates but also the resulting rate increases.

What does the ruling Affect?

Now, let's get into what the Health Reform ruling does affect.
The bulk of HR reform's effects will not be felt until Jan 2014 when the Exchanges come on board. This is really the crux of the Supreme Court's ruling.

A quick synopsis...starting Jan 1st, everyone will be able to get coverage through Exchanges (health insurance marketplaces) guaranteed issue which means they cannot be declined due to health. As an offset, everyone will be required to purchase health insurance (the so called mandate you'll hear about) or pay a penalty. That point is as the heart of the ruling and most contentious dialog on both sides of the issue. This is real deal...you can't have guaranteed issue coverage without some kind of mandate.

It's either both or neither.

If someone can get health insurance when they suffer a major health issue, the whole insurance market will fall apart. It's akin to buying home insurance when your house is on fire.

Premiums will explode and very quickly, the market unravels. Again, it's either you both a guaranteed issue market AND a mandate or you have neither.

Our concern is that we're actually trying to straddle both since the penalty for not having coverage is so low. It's real simple. If you don't have coverage now, would you rather pay a $95 (first year of 2014) or roughly $3000/annually for health insurance premium. Most current uninsured and even many insured will take the penalty until something bad happens. They will then enroll guaranteed issue and you see where this goes. Badly.

Congress wanted a penalty but they wanted it to be politically palatable.

Yes, the penalty will go up with time but not nearly as fast as the premiums under siege from the above mentioned situation. It's a spiral down from there.

What should people do?

So, what should the average California health insurance shopper/enrollee do?

If you have a grandfathered plan, it probably makes sense to hold on to it until 2014.

You probably won't find better rates. If you need to get coverage, we still have a bumpy (politically) year and half to go before the Exchanges show up. It makes sense to get individual coverage now to bide time till then. At that point, we can re-evaluate the options on the Exchange. Unless you are low income, the exchange plans probably will be very expensive since Congress mandates minimum benefits (which 80% of today's plans couldn't met).  

There's a huge cost to that. What does our gut say about 2014?

Net net of the Ruling

In the end, the Reform bill has some good provisions but is almost devoid of items addressing cost. That's right...the one thing we hear every day...cost. If the costs explode (which they will...look at Massachusetts or Tennessee or Group health in California), things will have to change so hold tight, We're really just trying to protect our selves till Jan 2014 and re-evaluating options then. Until then, prepare for a holding pattern.
 

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