One aspect of the federal healthcare reform that has been hotly debated since President Obama signed the Affordable Care Act into law in March 2010 is its cost: in particular, whether the new insurance mandates will raise or lower the cost of healthcare and, if so, by how much and for whom. Government officials are currently preparing to set up the key provision of the healthcare reform — the superstore-like health insurance exchanges, which will begin open enrollment in the fall — and as a result, the exact cost of coverage is becoming clearer.
Obamacare was designed to extend health insurance to many of the 49 million Americans without it and alter how healthcare is administered so as to curb the inexorable increase in healthcare spending. Congressional Republicans who oppose the law have argued that the new provisions will result in high premiums, making Obamacare likely to fail because the uninsured will not be able to afford coverage even with federal subsidies. Yet, states like California, Washington, and Vermont have finally revealed what pricing structures will look like, indicating that premiums under Obamacare will be more affordable than previously expected.
Consumer advocates approve of the new exchange. “It’s a revolutionary improvement to move from a broken market where people are charged by how sick they are, to a competitive market where people pay what they can afford, based on a percentage of their income, on a sliding scale,” Anthony Wright, executive director of advocacy group Health Access, told Reuters. “Most consumers buying coverage in the individual market will get financial help and see their premiums go down,” he added.
Obamacare mandates that businesses with 50 or more employees provide health insurance for their workers and their dependents or pay a penalty. Individuals who do not get insurance through their jobs can buy coverage through the exchanges, at a group rate negotiated by state regulators. The biggest federal subsidies will go to people who make less than 150 percent of the federal poverty level, or $17,000 for a single person.
California unveiled prices on Thursday that consumers will pay for healthcare. A 40-year-old Californian that makes less than four times the federal poverty level — an amount equivalent to $95,000 for a family of four or $46,000 for an individual — would pay as little as $40 per month for a mid-level plan, which will cover about 70 percent of medical costs and 100 percent of preventative care costs. This excludes the additional costs to cover children or a spouse. The same plan for a person who makes too much to qualify for a federal subsidy cost about $300 per month on average, the state said.
Furthermore, the total amount consumers would have to pay each year for co-payments and other out-of-pocket costs would be limited to $6,350 or less, depending on income.
Still, the modest rates announced Thursday do not signal to California Republican Assemblyman Dan Logue that the program will really work. “This is like a shell game to me,” he told Reuters. Logue, the co-chair of the assembly health committee, has predicted that taxes will increase to pay for the subsidies, forcing other prices to rise. “They’re not going to tell you that you’re going to pay for it in your gas or your food or going to the show,” he said.
Many opponents of Obamacare, Logue included, believe that costs will skyrocket because the Affordable Care Act requires health plans to offer more benefits and cover more people than they would have done otherwise. But Peter V. Lee, a health advocate recruited by the state to help implement its program, said that did not happen.
The state’s exchange will offer coverage from 13 insurers, while more than 30 applied to participate. Among them are some of the industry’s largest companies, including Kaiser Permanente and WellPoint’s (NYSE:WLP) Anthem Blue Cross and Blue Shield. Policies will vary in the provider networks, but as Paul Markovich, president of Blue Shield of California, told the publication, doctors and hospitals have lowered some of their rates to keep prices low. Some insurers had even agreed to limit profits, Lee added.
State regulators must still approve the rates.
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