Regulations are being released at a dramatic rate on the new Patient Protection and Affordable Care Act (PPACA) law, or what is commonly known as Obama Care.
Within this post I’ll give you the government rules and my opinion on how these changes will affect you and your California health insurance premium.
Until all of these changes are fully implemented, there is no way to determine the exact effect.
Obama Care Criteria
PPACA has told carriers that the only criteria that can be used to determine rates is the following.
- Age (3:1 ratio)
- Geography
- Wellness
- Family Size
- Tobacco Use (currently not allowed in CA)
Age (3 Tier System)
With the 3 Tier System (we currently have 7 age tiers) carriers will not be allowed to charge more than 3 times the rate for the oldest age bracket versus the youngest age bracket. The concern in this situation is that a large number of younger people will not take the insurance due to the expected high cost of the plans.
This is an effort on the part of the government to get the younger generation to pay more of the baby boomers’ health insurance premiums. The reason for this cost disparity is that people over the age of 55 use approximately 70% of all the premium dollars spent on health insurance (According to a Kaiser 2007 study).
Geography
At this time there are no changes to the Geography criteria. Carriers currently group different zip codes together to create a pool of people to determine risk within that pool. They are constantly monitoring the cost of claims versus the amount of premium for that pool of people. This is the reason that rural, or outlying areas, already have high premiums.
It only takes a couple of expensive procedures to cause rates to increase dramatically. It’s expected that the number of areas will expand, leaving a smaller pool of people within each area. This will create higher premiums, especially for those living in the rural areas of California.
Wellness
PPACA provides all insured people with FREE preventative care. The theory is that if problems are detected early, the cost for the care will be reduced. Carriers are going to be allowed to charge more for your premium if you are not getting your yearly scheduled preventative care (See Tobacco Use below).
Family Size
The determination of how family size will be computed has not yet been published. I do not anticipate any changes to the categories that are currently being used.
- Subscriber Only
- Subscriber + Spouse
- Subscriber + Child / Children
- Subscriber + Family (Spouse and Child / Children
Tobacco Use (Currently not allowed in CA)
Insurance companies will be able to charge Tobacco users up to 150% of the rate charged to Non-Tobacco users. Tobacco use will be monitored through your annual physical using tests for nicotine levels.
If you do not get your annual physical, the carrier will automatically put you in the Tobacco category because they will have no way to determine that you are not a Tobacco user.
Remember, all of your medical records are going to be online for any number of agencies to monitor your health. Insurance companies will be one of those agencies. While this is currently not legal in California, it is expected to change before the end of the year.
