What does eliminating all health insurance underwriting really mean? In New Jersey insurers must offer a series of standard plans and cannot apply any underwriting, everyone must be accepted regardless of health status. This is not different from requirements under PPACA.
To get an idea of costs I went to healthcare.gov and entered info for a family living in New Jersey. The father and mother were born in 1970 and there are two children one born in 2002 and the other 2005, all non-smokers. The first plan that came up was NJ Individual Choice Plan D provided through Aetna. This plan has a $1,000 individual deductible and $3,000 annual out-of-pocket limit and includes prescription drug coverage. You can go to any doctor you choose. In other words, it contains many of the attributes that people want to see from health care reform, relatively low out-of-pocket costs, and nobody coming between you and your doctor.
The premium for this coverage is $9,132 per month (yes, $109,584 per year).
Just to be sure there was no screw-up on healthcare.gov, I called Aetna directly and confirmed the price. That is ludicrous I said, who would buy that? The representative on the phone agreed it was absurd but noted that they are not allowed to do any underwriting for these policies.
I then looked at another plan offered by the NJ Blue Cross/Blue Shield plan. This plan was Point of Service, which means you must use network doctors to get full benefits. There is no deductible if you stay in network; the out-of-pocket limit is $5,000 per year per person. Office visits and some hospital services required a co-payment of $30 to $50 and $300 per day for the first ten days in a hospital.
The premium for this coverage is $2,128 per month. With restrictions and greater cost sharing comes lower premiums albeit $25,536 a year.
The question is, will the PPACA rules requiring elimination of underwriting and mandating new benefits affect the price of health insurance across the country. Remember, when politicians talk about “affordable” health care they are talking about the premiums people pay (after being subsidized), not the true cost of the coverage.
These prices are due largely to the elimination of underwriting in New Jersey several years ago which brings with it adverse selection (and NJ is a high cost state to begin with) . The potential for adverse selection is one reason insurers pushed for mandated coverage under health reform. The only way to assure a more diverse pool of insured people is to make sure that everyone is in the pool. It remains highly questionable if the penalties in PPACA for not carrying health insurance are sufficient to avoid the problems experience by Massachusetts where people obtain coverage when it is needed and thus further drive up costs for all those who are insured.
Despite the political rhetoric, there is no free lunch. Health care premiums reflect the cost of health care provided.
The penalties for not carrying health insurance are the greater of the flat fee or the percentage of income.
Year Flat Fee Percentage of Income
2014 $95 1.0%
2015 $325 2.0%
2016 $695* 2.5%
*The penalty will be increased annually by the cost-of-living adjustment
QUINNSCOMMENTARY 
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