Will the Healthcare Law Increase Your Costs?

Under the sweeping Affordable Care Act (ACA), which passed in 2010 and was upheld by the Supreme Court last year, the healthcare system in the United States will be overhauled and millions of uninsured Americans will become covered.

Divorced Couple Cannot Become “Legally Separated” for Health Coverage Purposes

In a new case, a state appeals court in Alabama overturned a trial court’s move to amend a couple’s divorce decree to make them legally separated so the wife could continue to receive healthcare benefits.

Facts of the case: Robert Daniel Leverett and Debra Edmondson Leverett were divorced in 2012. They agreed that the wife, who is disabled, would continue to receive health coverage under the husband’s insurance plan through the U.S. military.

However, as a result of the divorce, the plan terminated the wife’s coverage because its eligibility rules did not allow former spouses.

At that point, the wife asked the trial court to amend the divorce decree to make the couple legally separated so she could continue to receive medical benefits. The court made the request.

The state appeals court overturned the change, stating the trial court had exceeded its discretion in substituting a judgment of legal separation for the previously entered judgment of divorce.

“…There was no legal basis for the trial court to frustrate the intent of the parties to be divorced simply to accommodate the wife’s desire to maintain military health-care benefits,” the court stated.(Leverett, Ala. Ct. of Civil Appeals, 2111042, 3/22/13)

The ACA has numerous provisions — some that have already taken effect and some major changes scheduled to kick in next year. Among the provisions are:

Restricting insurance companies from denying coverage, excluding individuals with pre-existing conditions, or charging more based on a person’s health status.

Creating state health insurance exchanges that will cover uninsured individuals and those currently covered under state high-risk pools.

Requiring large employers to offer health coverage to full-time employees or be charged a penalty.

Imposing a tax penalty on individuals who do not buy sufficient health insurance coverage.

How will the ACA affect your individual healthcare costs — and the cost for employers providing healthcare coverage? Recently, some predictions were made in a new study published by the Society of Actuaries, a professional, educational and research organization.

The study, which focused on the individual (non-group) market, predicted that by 2017, insurance companies will have to pay an average of 32 percent more for health coverage claims on individual polices. The increased costs will come from the changes in composition of the people being covered by insurance.

Those increased costs could be passed on to certain parties in the form of higher premiums.

Other predictions from the study, titled “Cost of the Future Newly Insured under the Affordable Care Act:”

Moving from the group market to the individual market – A significant number of people currently insured through state-sponsored high-risk pools or through the temporary Pre-Existing Condition Insurance Plan high-risk program will move into the individual market. In other words, more sick people will be covered. In states that operate a high-risk pool, the impact of these higher-cost individuals has been spread over a wider pool through approaches that vary by state.

“Under the ACA, the impact of these members’ higher costs will be concentrated in the individual market,” the Society of Actuaries study states.

Employer coverage – A number of people currently insured under employer-offered plans will move to the individual market, either because employers stop offering coverage or because the people perceive more value in the individual market than in their employer-provided plan. According to the Society of Actuaries research, even small shifts from the employer-provided market will have a significant effect on costs in the much smaller individual market.

The individual market size – Currently, most people don’t buy insurance as individuals. But the size of the individual market will more than double, the study predicts, driven in part by people who are below 200 percent of the federal poverty line coming into the market. “This group of people are considered to be ‘good risks’ and are generally expected to bring down average costs. But other changes in composition of the individual market will drive average costs up,” the Society of Actuaries states.

Specifically, shifts of currently insured people from high-risk pools, the employer market, and previously uninsured persons who must pay for individual market coverage, “will overwhelm the expected lower costs anticipated by the influx of newly-insured persons in the exchanges receiving federal benefit and premium subsidies,” according to the Society of Actuaries.

As a result, the underlying claims cost of insurance in the individual market will increase by an average of 32 percent nationally, when compared to what it would have been without the reform law.

State differences – The change in individual market costs will vary substantially across state lines. This can be attributed to factors including whether the state has a high-risk pool, demographic/ income differences in populations and underwriting practices.

States that are currently low cost could see increases of up to 80 percent, while states that are now high cost could see double digit decreases.

Note: After the study was released, White House officials disputed its findings stating that it was speculative and didn’t address all financial aspects of the law. In response, a Society of Actuaries spokesperson said the study did not attempt to address all factors affecting cost increases. The goal was to look at claims — described as the “most important driver of health care premiums.”