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Why We Can’t Estimate the Cost of the Affordable Care Act

It was noted yesterday that the program designed to provide temporary high risk insurance coverage will fall far short of its goals between now and 2014.  This should come as no surprise.  Just look at the states that have already started programs like this.     The 35 high risk pool states all operate at a loss even though they charge premiums higher than what will be allowed in the federal program.  What will happen in 2014 when all insurance companies must accept people with pre-existing conditions?

Right now, federal law requires employer provided insurance plans to accept people with pre-existing conditions providing they’ve been insured in the past.  This covers most of the working people in this country whether they have pre-existing conditions or not.  Insurance companies don’t go broke providing for these high-risk people nor do the companies who buy the insurance for their employees because these are large group plans with large risk pools.  These large risk pools have many healthy people to help pay for the smaller number of seriously sick people.

The new Patient Protection and Affordable Care Act requires all uninsured  individuals/families to buy insurance  in order to create a large “non-group” risk pool which would work the same way.  Here’s the problem:  Why should healthy people/families buy insurance when they rarely need a doctor?  That’s the reason many of the uninsured don’t have insurance now.   Early Congressional renditions of health care reform provided for this by stipulating serious penalties like fines of $1,900.00, jail, and penalties of up to $25,000.  Others deemed these too onerous and when the insurance bill passed, the fine was reduced to $95 at the beginning going to $695/$2085 for individuals/families after 2016.  This compares with the national average insurance rate of $2985/$6328 according to American Health Insurance Plans (AHIP) Center for Policy and Research.   This simply is not enough of a threat to stop a healthy individual/family from gaming the system by risking the fine and forgoing insurance because the law will force an insurance company to cover them when and if they need serious medical aid.  The result is a “non-group” risk pool with not enough healthy people to fully cover the high cost of medical attention for those with serious health problems.  Insurance companies will be forced to raise rates in order to survive.  There goes the ‘affordable’ in the Patient Protection and Affordable Care Act.

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