In Part II of this blog series on the Patient Protection and Affordable Care Act (PPACA), I will explore the following statement: “Adults with pre-existing conditions became eligible to join a temporary high-risk pool, which will be superseded by the healthcare exchange in 2014.To qualify for coverage, applicants must have a pre-existing health condition and have been uninsured for at least the past six months. There is no age requirement. The new program sets premiums as if for a standard population and not for a population with a higher health risk. Allows premiums to vary by age (4:1), geographic area, and family composition. Limit out-of-pocket spending to $5,950 for individuals and $11,900 for families, excluding premiums.”
In addition, the premiums (effective September, 2010) for this high-risk pool were set as follows:
- Premium to be set at a standard rate for a standard population
- Premium for older individuals allowed to be up to 4 times the premium for younger individuals
- Premium for tobacco users allowed to be up to 1.5 times the premium for non-tobacco users
What is disturbing about this premium scheme is that individuals who cannot control their age are required to pay much more than individuals who can control their tobacco-related habits. Does this seem disturbing to anyone else?
While there is a limit on out-of-pocket spending, there is no ceiling on premiums (yet) and no floor for benefits. There is a 40% excise tax on premiums greater than $27,500 for families and $10,700 for individuals. However, this tax on health insurance companies does not go into effect until 2018. In addition, the healthcare exchange mentioned in the provision does not take effect until 2014.
The healthcare exchange is a government subsidy that will be provided to families based on size and annual income as a percentage of the federal poverty line. For instance, a family of 4 whose income is 400% above the poverty line (in other words, $88,200) will have a maximum out-of-pocket premium of $8,379 (9.5% of income). However, for another two years there is no premium ceiling, and for another six years there is no penalty for charging high premiums. Further, there is no premium ceiling at all for families whose annual income is above $88,200. What can this mean for a middle-class family in the US?
In the same year as the healthcare exchange takes effect, the government will also begin imposing a $2,000 tax per employee on employers who do not offer health insurance and employ more than 50 individuals. Thus, in two years, a family of four making $90,000 annually can lose its health benefits and be forced to purchase its own insurance for which there will be no subsidy and no premium ceiling.
What if the primary breadwinner of this family loses his job but has a pre-existing condition that may not be insured for 6 months to 10 years by a new healthcare package, based on the state in which the family resides? Even if he finds a new job right away, will he have to refuse healthcare for six months in order to enter the temporary high-risk pool of individuals, some of whom may have to pay up to four times the standard premium because they are older? Will this individual be able to afford this high premium when combined with insurance costs for his family? How will he insure his family during those six months? I have yet to find answers to these questions in the PPACA. I hope I am missing something.