If you like your insurance, maybe you can keep it?

4/26/2016 05:38:00 PM
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As I've argued from the beginning, the ACA doesn't actually ban any insurance plans. That isn't even within the scope of federal policy—the federal government leaves it up to the states who have their own regulators to determine which insurance products can and cannot be sold within the state. But the ACA does require everyone to have a certain type of insurance or pay a tax, and many existing insurance policies didn't qualify for this requirement. Most analysts thought this mandate would kill demand in the pre-ACA market of non-qualifying plans, giving rise to the whole "if you like your health insurance you can keep it" controversy. That's not the same as banning those non-qualifying insurance plans, but alas no one would listen to me.

Turns out they should have, because the market for pre-ACA-style non-qualifying insurance plans is booming. I certainly didn't expect that! Apparently more people are willing to sign up for cheap low-coverage plans now that they know that if anything serious happens, they'll be able to sign up for comprehensive coverage through the ACA exchanges.

Generally these plans have small networks, high cost-sharing, and a lifetime cap at around $1 million in health expenses, along with risk-rated premiums and exclusions on people with pre-existing conditions. Prior to the ACA, relying on these plans was extremely risky—not only could you easily breach your lifetime cap if you develop a serious health condition, but you could find your self unable to buy any other insurance after this because you now have a preexisting condition, and even if you could get insurance it will be risk-rated and therefore much more expensive after you develop a known health condition. Under the ACA, however, guaranteed issue means you'll be able to buy insurance with a preexisting condition, while community rating means it won't cost a dime more no matter what conditions you've developed. Hence, the ACA has counter-intuitively increased the appeal of non-conforming health insurance.

The downside of all this is that it means we can expect the ACA risk pool to be sicker and therefore more expensive for everyone who does buy it. There's a heafty tax penalty for not buying an ACA conforming plan, and there are substantial subsidies for some people who do, which together with the fact that non-qualifying plans have very crappy coverage means only the healthiest individuals will chose this route.
Justin Bro 5/06/2016 02:23:00 PM
One other thing I would add is that usually these non-qualified plans are only available in 6 month increments. So if you buy it in January, get sick in February, and it expires in June, you can't re-enroll and you can't by an ACA plan since it would be outside of the ACA enrollment window. Very risky indeed...pretty sure the folks selling these aren't explaining that aspect.