A Quick Guide to Individual Insurance and Health Reform

Let's take a very top down view of how the known Health Reform statutes will impact the  individual health insurance market with a guide of probably outcomes.  We'll break it down by the main categories of Underwriting, Benefits, Affordability, and Timetable.  Let's get started with Underwriting.

Underwriting is the process of qualifying whether an applicant will be accepted for a given health plan.  We're all familiar with the dreaded California health insurance application which has been the primary vehicle for the underwriting process.  The biggest part of the underwriting process centered around a person's health history and status which would typically drive whether a person is approved or declined.  When the primary health reform act goes through at the beginning of 2014, the medical underwriting aspect will largely go away.  There will no longer be medical underwriting in the Exchanges which should shorten not only the application process but the response time as well.  This should be a welcomed relief although we'll see the results in the affordability section.

Now let's discuss what we know about the benefit side.  This is actually pretty interesting and a big departure from our current planscape.  For one thing, there will be many mandates which we did not have before and many are already in place.  Maternity is required on all plans as is preventative coverage at 100%.  The real big departure deals with new mandated or minimum benefit levels.  California has decided to base their levels on the Kaiser $30 copay group health plan. 

There are 4 basic designations: 

Platinum (90% of the base plan), Gold (80%), Silver (70%), and Bronze (60%).  There will also be a separate catastrophic plan option (50%??) for younger adults.  We don't have an official designation of what 90% of a no deductible $30 copay plan is but if we had to guess, maybe $250 deductible, $500 deductible, $750 deductible, and $1000 deductible respectively.  This is just a guess but we're trying to look forward.  This rich level of benefits sounds great but it quickly takes us to our next category...Affordability.

 The Exchange will be the primary marketplace to purchase individual health insurance.  There will be subsidies up to 400% of poverty which is approximately $80K for a family of four in California.  We looked at the subsidies and they max out at about 50% for 150% of poverty.  The problem is that today's real market is around a $3K deductible on average.  People aren't choosing high deductibles for no reason...they're picking it because health insurance has become too expensive and they can't afford going up the scale. 

Just a back of the napkin estimate but if you drop deductibles from $3K to $1K, premiums would roughly double.  Even if you subsidize the premium by 50%, you're still requiring people to pay a lot of money.  It's going to be tricky and our guess will be that newer, more catastrophic health plans will have to be rolled out after public outcry.  This is all speculation but we'll update as we get closer.  Final word...up to 400% of poverty, you'll get help paying the premium.  Above that level of income and get ready to pay quite a bit.

 Finally, timetable.  Many of the Health Reform elements have already been rolled out but the big piece of it is the Exchange which comes online officially Jan 1st, 2014.  Most of the other small elements are already in place (guaranteed issue for children, maternity, preventative benefits, women's preventative benefits, etc).  As we get more information, especially on the benefit make-up, we'll make sure to add that information to www.calhealth.net

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