Understanding Health Insurance Premiums Under “Obamacare”

ObamacareThe Patient Protection and Affordable Care Act, also known as Obamacare, went into effect on March 23, 2010. The program has a tiered approach, which means that all the provisions in the act will not be active until January 1, 2020. The primary purpose of Obamacare is to ensure that all Americans have access to health insurance, regardless of their ability to pay. However, each individual is also responsible for securing health care unless they are able to receive an exemption based on a financial hardship. Since the law requires people to purchase health coverage or pay a penalty, Obamacare has been very controversial. There are also several sources that believe that the enactment of the act is causing a dramatic increase in health insurance premiums that middle-class families pay for their coverage.

Although it is still too early to know how the changes affect health care protection for certain, The Hill predicts that there will still be 27 million people uninsured by 2016. However, this still provides insurance for approximately 28 million people who were uninsured as of 2010. One of the major reasons that so many additional people will receive coverage is that Obamacare makes it illegal for insurance providers to turn people down who have pre-existing conditions – though this provision of the law will not go into full effect until January 1, 2014.

Obamacare Insurance Penalties

According to a report released by the Congressional Budget Office (CBO) in 2009, the cost of health insurance coverage for middle-class Americans was only expected to increase by three percent during the first four years of Obamacare. The CBO recently released a statement that indicates that approximately 6 million Americans will be responsible for paying the non-insured tax penalty.

The average penalty for these taxpayers will be $1,200 per year, and there is some concern from politicians and industry analysts that this could cause a financial hardship for up to 80 percent of the affected individuals and families. However, these estimates have been refuted by the Obama administration, and they are sticking by their statement that only two percent of taxpayers are expected to receive a penalty for failure to comply with the Obamacare law.

Health Insurance Premiums and Costs for Middle-Class Americans

A hotly debated topic right now among industry experts is whether or not middle-class Americans will see a huge increase in their health insurance premiums over the next few years. According to Mark Bertolini, the CEO of Aetna, it is possible for people within the middle-class to see an increase ranging from 50 to 100 percent. Bertolini is placing the blame for this in part on the exchanges program that each state will be participating in. Regardless of whether or not each state chooses to manage their own exchange program, the government still requires these exchanges to exist. Therefore, if a state declines to operate its right to oversee their exchange-eligible population, the federal government will step in.

A study conducted by the Kaiser Family Foundation indicated that the cost of employer-offered healthcare increased by nine percent in 2011. The average increase for health insurance premiums from 2007 to 2010 was five percent per year, which has led some industry analysts to the conclusion that Obamacare is responsible for almost doubling the price hike.

Drew Altman, the CEO of Kaiser, has a different opinion about what caused the unusual increase. Altman believes that Obamacare was only responsible for one to two percent of the overage, leaving the remaining two to three percent due to the rising cost of health care. Altman further pointed out that the main impact of Obamacare will not even take effect until 2014, and that it therefore does not make sense to blame a four percent increase on the health care act. FactCheck.org, an independent group that verifies the claims that are made by politicians, agrees with Altman, although they did also point out that one of the main anticipated benefits of Obamacare was a reduction in health care costs, instead of an increase.

Should I be Worried About My Health Insurance?

The actual impact that Obamacare will have on the nation’s middle-class is almost completely subjective at this point because the full law has not gone into effect. However, it is always a good idea to be prepared for unexpected changes in the future, and maintain a healthy lifestyle regardless of changing health care provisions; therefore, it makes sense to budget for an increase to your insurance expenses on an annual basis.

Although it is possible that Obamacare will double your health insurance premiums by the year 2020, it is also possible that the speculation over increases in health insurance premiums will prove to be baseless.

(Photo courtesy of Pete Souza via Wiki Commons)

This article was written by Chad Fisher, who writes about a variety of financial and insurance topics.