Many younger, healthier individuals could be surprised to see the cost of their insurance skyrocket 40 percent or more under the Affordable Care Act (ACA) in 2014. What’s behind this? The ACA imposes a form of modified community rating which compresses the rate classes, and prohibits rating using gender or health status. The factors that can be used are the following:
- Individual or Family Enrollment
- Geographic Area
- Tobacco Use
There are still limits within these factors. For example, the age factor only allows for a maximum 3:1 variation in premiums for adults, thereby capping its effectiveness at 3x the lowest rate. While the fact that age is factored in may be good news for young adults, who traditionally as a demographic use less health insurance than the elderly, the 3:1 variation limit puts some upward pressure on premiums for those in their 20s and 30s. We came across a neat website by a group called Young for Affordability which has an online calculator where you can by zip code see how much a young person’s health insurance will rise because of the changes. We encourage you to check this out and calculate the cost for young Americans at http://youngforaffordability.org/
Smokers Hit Hard Too: What many health experts are applauding is the impact the new rating will have on costs for smokers and, hopefully, an incentive to quit smoking. Millions of U.S. smokers will see huge increases as the new rating system will allow up to 50% higher premiums for smokers. Hardest hit will be older smokers who could see charges increase by $5,000; for example, it is estimated a 55 year old smoker rating penalty could reach $4,250 a year and a 60 year old could pay as much as $5,100 more in premiums. The theory is smokers’ health risk increased dramatically, and gets much worse with age. Some health critics said if the government wanted to really do something to curb health care costs they would have similar penalties for the obese as America seems to be getting bigger each year. It is estimated obesity is adding an astounding $190 billion to annual healthcare costs in this country.
No matter how you slice it, premiums are going up for a majority of Americans, the only variable is by how much they will rise.