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5 Things Consumers Need to Know about the New Health Insurance Market

This week we commemorate the 150th anniversary of the Battle of Gettysburg. That turning point of the American Civil War pitted friend against friend, brother against brother, state against state. Perhaps it’s fitting at this time that we revisit another more recent battle that pitted American against American—the battle over the future of healthcare.

Wherever you came down on the Affordable Care Act of 2010, either in favor of the law or against it, is irrelevant now. It’s a round that’s been fired. You can’t get it back in the casing. Now is the time for the law’s supporters and opponents to deal with the implementation, which will be messy. Just this week the government announced a one-year reprieve for large businesses to comply with the law’s mandatory insurance requirements.

So, there are five things consumers need to know about health care going forward.

First, in six months the policies sold by “insurance exchanges,” the crown jewel of the law, begin taking effect. That means if you’re not covered by insurance through an employer, the Medicaid program or Medicare, you’ll need to buy health insurance or pay a penalty. The exchange in your state is a likely place to start looking.

Second, in this new world of health insurance, no good deed goes unpunished. So if you’re a healthy adult who’s taken care of himself all these years, you’ll probably pay more than you have been paying for insurance. A lot more.

The third thing you need to know about health insurance is that the law now mandates guaranteed issue of policies. This means, like the announcer on late-night cable TV says, you can’t be turned down. Regardless of your health condition you’ll be issued a policy.

If you’ve got a pre-existing condition, in all probability that policy will cost less than what you have been paying on the open market. But how can the insurance carriers do that? How do they offset the risk that you present to them? Simple. 

And that’s the fourth thing you need to know about the new world of health insurance under the ACA. The premiums of healthy insureds will be going up to subsidize the risk presented by the less healthy policy-holders.  In essence, if you’re a healthy non-smoker in your 20s or 30s you’ll be paying to cover the risk presented by other, less healthy, policy holders.

So who wins and who loses under this new system? Clearly, the winners are those individuals who have trouble getting affordable insurance now or who have altogether been priced out of the market because of their health conditions. The losers are those healthy, demographically benign individuals who will see their rates go up.

For example, in one analysis, a 40-year-old nonsmoker in Virginia today could obtain a high-deductible ($5,000) plan, which would cover half his medical costs for about $60 per month. By comparison, the least expensive plan available through the exchange system will cost him nearly $200 per month.

Unknown at this point is how many healthy individuals will resist seeing their premiums more than triple going forward. In order for the exchanges to function they’ll need as many nonsmoking vegans, joggers and yoga enthusiasts as they can get. If they bail out of the insurance market and just decide to pay the penalty for not carrying insurance, the actuarial tables get really sideways really fast.

So the fifth thing you need to know about the new healthcare law is your options. If you’re that healthy, middle-aged individual, you need to develop a plan now to anticipate the changes coming next year. Compare insurance quotes—to each other and to what you’re paying now. Examine what your liability would be if you “ran bare”—without coverage. Know now what changes might be in store for your current policy.

Guaranteed issue is an attractive concept and papers over a lot of the flaws in our current healthcare system. But the cold, hard reality is that someone has to pay for it. And like everything else that seems too good to be true, that person is you, the consumer.