On Monday, Kaiser Health News reported that health insurers are sending thousands of cancellation notices to consumers who buy coverage through the individual market because of requirements imposed by Obamacare. While Affordable Care Act critics are certain to use the news as proof that the health law is unworkable, the reality is that the Americans who own these skimpy health policies will get far more robust plans through Obamacare’s marketplaces — and most will qualify for government assistance to pay for that insurance.
Many policies currently sold through the individual market do little to help people who actually get sick. These plans come with appealingly low monthly premiums to draw in consumers. But those supposedly “affordable” rates typically mask high deductibles, big gaps in coverage, and large co-pays for essential care like prescription drug services that consumers tend not to realize until they actually need to use their coverage. And if you have a pre-existing medical condition or get sick, your rates go up — if you’re even able to buy a plan in the first place.
Insurance companies have been able to get away with this because they were largely unregulated before the health reform law’s passage. Now, Obamacare is changing that.
Under the health reform law, insurers can’t discriminate against people with pre-existing conditions, or set lifetime or annual caps on people’s health services. And insurance plans must offer a broad range of ten “essential health benefits” including maternity care, prescription drug coverage, and mental health services. That explains why major individual policy sellers such as Florida Blue and Kaiser Permanente in California are discontinuing large swaths of their current health plans — they simply don’t offer a minimally acceptable level of health coverage.
Some have raised concerns that the new insurance plans that meet Obamacare’s minimum coverage threshold will be more expensive than previously-available policies, since they have to offer more robust benefits. But independent analyses of the ACA’s effect on the individual market have found that nearly half of Americans who currently have individual health plans will get government subsidies averaging $2,672 of a consumer’s annual premium:
CREDIT: Kaiser Family Foundation
And that’s just the estimate across all individuals, irrespective of whether or not they qualify for government subsidies. Obamacare grants more generous subsidies to Americans who make less money, and among subsidy-eligible individuals, the tax credit will be closer to $5,548 per year.
Depending on the level of coverage that consumers choose, new health plans will cover anywhere from 60 percent to 90 percent of individuals’ medical costs. For instance, healthier Americans who might want a bare-bones “Bronze” plan would receive subsidies that pay for 77 percent of their premiums. Younger people who want even cheaper plans that provide less benefits can always turn to a “catastrophic” insurance plan that only pays out in the case of a major illness or accident that can cost hundreds of thousands of dollars in medical expenses.