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Oct. 4th, 2013: - johnlocke.org Manage Subscriptions

Federally Approved Health Plans For Sale: Subsidies Not Included
By Katherine Restrepo

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It has been three days since ObamaCare's health insurance exchanges launched for enrollment.  Individuals can now purchase federally qualified health plans from participating insurers.  People with pre-existing conditions can no longer be denied coverage.  If you decide to sign up for a heavily regulated heath insurance plan, you'll need to push aside the political debates and overlook the technological glitches, and instead be more concerned with the fine print of the plans themselves.  It's worth some observation.

The Fine Print

The establishment and rollout of ObamaCare's health insurance exchanges intends to provide individuals with affordable plan options offered by an array of participating health insurers.  Sounds like some solid competition and choice, right?  But, of course, all is not what it seems.  Health insurance exchanges limit consumer choice due to three key reasons:

1. Required Benefits: Any health plan a consumer decides to purchase, whether it be inside or outside the exchange, must include10 Essential Health Benefits as mandated by the federal law.

2.  Narrow Networks and Providers: It seems that, for states with at least half a dozen insurers on the exchanges, the availability of more plans will also yield competitive prices.  What goes unsaid is that lower monthly premiums mean narrower provider networks, higher out-of-pocket expenses, and providers paid at Medicare levels.   

Last week's New York Times wrote:

Federal officials often say that health insurance will cost consumers less than expected under President Obama's health care law. But they rarely mention one big reason: many insurers are significantly limiting the choices of doctors and hospitals available to consumers.

The Daily Caller contributes to the issue as well:

Missouri: Patients of the state's largest hospital system -- which spans 13 hospitals including the St. Louis Children's Hospital -- will not be covered by the largest insurer on Obamacare exchanges, Anthem BlueCross BlueShield. Anthem covers 79,000 patients in Missouri who may seek subsidies on Obamacare exchanges, but won't be able to see any doctors in the BJC HealthCare system.  

Looking at this issue from another angle, roughly 70% of physicians are now employed by hospital systems.  There was a time when the majority of medical providers practiced independently.  Ten years ago, this statistic was flipped, as only 30% of physician groups worked for these health systems.

Since a majority of physician practices are now under the ownership of this excessively consolidated market, if major hospital systems are not within an exchange plan's provider network, then patients may not have access to the quality providers who work for that hospital system.   

3. North Carolina's Exchange: Only two insurance companies, Coventry Health Care of the Carolinas and Blue Cross and Blue Shield of North Carolina, have signed up to participate in North Carolina's federally-facilitated exchange.  Blue Cross and Blue Shield already controls 85% of the individual market and is the only insurer offering plans in all 100 counties of the state.  Coventry Health Care, meanwhile, offers plans in just 39 counties. 

Subsidies Not Included

Nancy Pelosi once said that Congress had to pass the Patient Protection and Affordable Care Act so we could all find out what was in it.

We certainly are. 

And now with the unleashing of more information on premium rates, it remains clear that certain young individuals will not qualify for subsidized health insurance plans as the Obama Administration once promised.

The Obama Administration incessantly advertises that individuals and families who purchase health plans on the exchanges may qualify for subsidies that will offset the cost of their health insurance premiums.  Qualifying individuals earn annual household incomes between 100-400% of the Federal Poverty Level.  To put this in perspective, the following policyholders may receive premium assistance tax-credits:

  • Individuals earning up to $45,000
  • Couples earning up to $60,000
  • Families of four earning up to $94,000

Based on a recent study by the National Center for Public Policy, it turns out that in two-thirds of the states, subsidies do not extend beyond the 300% FPL for "young invincibles" 18-34 years old.  In fact, subsidies greatly diminish for an individual of this age group earning over $25,000 a year.  Here in North Carolina, subsidies do not extend past 309% FPL ($35,504) for a 34-year old.

Find out whether you qualify for a subsidized plan here.

In a nutshell, this is another reason why ObamaCare causes chest pain.  The only way these exchanges can remain financially afloat by 2015 is IF the young, low-risk individuals pay higher premiums, thereby subsidizing the old.  The old pay less at the expense of the young; that is the concept of community rating.  Otherwise, the exchanges will be flooded with older, high-risk individuals paying higher premiums than otherwise promised.  Since subsidies greatly tail off for low-risk individuals between 18-34 after annual income exceeds $25,000, these exchange plans don't look too appealing for these individuals.  High premiums for the young will trigger high opt-out rates, causing the structure of these insurance marketplaces to collapse.

Even Bill Clinton says so.

The exchanges may be open for business, but the critical question is: "For how long?" 

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