Pre-existing conditions and the health insurance premiums you pay

2013

You don’t hear much about this any more; it’s old news. Nevertheless, it’s critical news that portends the reality of premiums in not only the marketplace health plans, but all non-group health plans. You won’t see too much of an impact on premiums for 2014 because insurers are trying to buy business and they are betting that higher costs will be offset by people buying insurance who don’t need it at the moment and won’t use the coverage. The real risk comes in 2015 when there is a year of experience.

Think of it this way. If you join a company that offers health benefits, every employee is eligible to carry coverage, both the sicker people and their families and healthy people who spend nothing on health care in a year. Those combined costs are what drive premiums. And, keep in mind the working population is somewhat healthier than the rest of the population. However, if new, younger employees don’t join the plan, the costs per person will rise. This is also why a population of early retirees in the same plan as the rest of the company will have significantly higher costs and premiums.

The elimination of nearly all underwriting and the move toward community rating within the Obamacare exchanges shifts costs around, but does not alter the fact older, sicker people are more expensive to insure than younger people.

Consider this; 400,000 expected to enroll; five billion to pay claims and then reality sets in; 125,000 enroll and the $5 billion is nearly gone seven months before the program ends. That is the temporary program for people with pre-existing conditions under Obamacare. Do these Americans need health care, certainly they do, but what we don’t need is politicians making unrealistic promises based on absurd assumption.

The short-term solution of the Administration is simply to cut payments to doctors and hospitals treating these people. The long-term solution, well that is to have the people in the health insurance exchanges using premiums paid by healthier people along with federal tax credits pick up the bills.

Don’t get me wrong, spreading the risk is the only way to fairly spread the cost (just like in a large employer plan), but don’t simultaneously tell people “competition” among insurers is going to lower premiums. That is fantasy.

From the New York Times:

When the federal program for people with pre-existing conditions ends on Jan. 1, 2014, many of them are expected to go into private health plans offered through new insurance markets being established in every state. Federal and state officials worry that an influx of people with serious illnesses could destabilize these markets, leading to higher premiums for other subscribers.

For this reason, federal and state officials say, they will try to recruit large numbers of healthy young people to buy insurance. Their premiums would help pay for the care of less healthy people.

Need more proof; read this recent article from the New York Times. Here is a women who apparently voluntarily retired at age 63 knowing she had medical conditions, knowing (or should have known) getting health insurance would be expensive or impossible; is not yet eligible for Medicare, but will use an exchange plan to bridge the gap.