Buying insurance after health care reform

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For many consumers, the biggest question about health care reform centers on how the law will change the way we buy and use health insurance.

If you feel perplexed about how the law will affect your own health insurance coverage, you’re not alone. A Quinnipiac University poll in April found that 56 percent of respondents admitted they didn’t have enough information to know how the law will impact them personally.

To help you cut through the confusion, here’s a look at how the health insurance market looks now, and how it will change in the years ahead.

If you buy health insurance individually …


Now: “There is currently a whole range of avenues to buying health insurance on the individual market,” says Bianca DiJulio, senior policy analyst at the Kaiser Family Foundation in Washington, D.C. You can purchase coverage individually from a health insurance provider, search for policies through an agent or broker or go to a health insurance website, DiJulio says.

After health care reform: Many details have yet to be ironed out, but by 2014 individual health insurance plans will be sold on state-created exchanges available via the Web and by telephone, says DiJulio. In order to be sold on the exchange, plans will have to provide a minimum level of coverage, so future individual plans will be more comprehensive than many of today’s plans and will cover often-excluded items such as maternity care, says Sara Collins, vice president for The Commonwealth Fund, a health care research foundation in New York.

Plans that meet this minimum will be divided into four tiers, depending on the percentage of enrollees’ medical expenses they pay on average, says Robert Zirkelbach, a spokesman for America’s Health Insurance Plans, a trade group in Washington, D.C.


Now: The application process varies by state thanks to the patchwork of health insurance regulations. Once you’ve found a company, you fill out an application, answering questions about your medical history. The health insurance provider reviews your application and offers you a range of coverage options that may include a cheaper plan that excludes your pre-existing medical problems from coverage and more expensive plans with comprehensive coverage. Or, they may decide not to cover you, Collins says.

After health care reform: The new law prohibits increasing health insurance premiums or denying coverage because of an applicant’s medical history, so applications will likely become shorter and less painful, Collins says. The only criteria health insurance providers will use to set rates will be age, geography and whether or not you’re a smoker, she says.


Now: What you’ll pay varies considerably based on age and medical history, says Zirkelbach. The young and healthy pay relatively little, while older and less healthy people pay much more.

For many consumers, premiums on the individual market are unaffordable, Collins says. In a 2007 study by The Commonwealth Fund, 73 percent of those who tried to buy health insurance on the individual market didn’t end up buying a policy, with 61 percent citing expensive premiums as the main reason.

After health care reform: You’ll likely pay more for individual health insurance once the new law is in effect, Zirkelbach says. A Congressional Budget Office report conducted last year for Sen. Evan Bayh, D-Ind., found that the Senate bill would raise premiums for an individual by 10 percent to 13 percent.

Also, the new law will eventually limit how much your premium can be based on age, so younger policyholders will likely pay more while older policyholders will pay slightly less, says Zirkelbach.

To defray cost increases, tax credits will phase in to limit the amount of income that you’ll have to dedicate to premiums, depending on how much you earn. For instance, a family of four with an annual income of $44,100 will pay $2,778 per year, or $231 per month, in premiums to purchase a policy that covers 70 percent of their medical costs. The federal government will pay the remaining costs.

What coverage you’ll get

Now: Policies vary widely. Unless you live in a state with strict health insurance regulations, there is no minimum standard for health insurance coverage. What you’ll pay out of pocket depends to a large degree on which policy you choose, your medical history and how much you’re willing to pay in premiums.

After health care reform: Policies will have much more transparent terms, broader coverage and no annual or lifetime limits. Insurers also won’t be allowed to drop customers through rescission, the practice of canceling coverage based on unintentional mistakes in a policyholder’s application, says Collins. Having coverage also will allow you to avoid rising tax penalties imposed on those who don’t carry coverage.

If you get health insurance through an employer …


Now: You can choose from a limited range of plans available through your employer’s human resources department.

After health care reform: You’ll still be limited to the types of plans offered by your employer as long as they meet the same standard minimum of coverage required by the exchanges, Collins says. The number of employers with more than 50 workers to offer health insurance will likely increase, since employers whose employees receive tax credits to buy insurance on exchanges will be fined in most circumstances, says Collins.


Now: The application process varies by employer, but typically you have to opt in to a company’s health insurance plan to get coverage by filling out forms and agreeing to pay premiums charged by the company plan over and above what your employer pays.

After health care reform: As with private health insurance, applying for coverage from an employer will no longer require answering questions about your medical history. If you work for an employer with less than 200 employees, you’ll still have to opt in. If your employer has more than 200, you’ll automatically opt in to a company plan.


Now: Employers ask employees to pay varying amounts to help cover their health insurance, but it’s usually much less than what someone shopping for health insurance on the individual market would pay.

After health care reform: Any increase in premiums caused by the law should be negligible for most workers, according to the CBO report.

What you’ll get

Now: You’re probably part of a plan that’s more comprehensive than those purchased on the individual market, but it may have hidden limitations that you may not become aware of until a claim is denied, says Collins.

After health care reform: If your employer is offering plans with lots of limitations, you’ll probably end up with higher-quality plans after the law goes into effect, thanks to health care reform’s minimum benefit levels. However, not much will change if your employer-sponsored health insurance meets minimum standards, says Collins. In addition to your normal benefits, you’ll also avoid the escalating IRS penalty that will come with being uninsured.