A recent study found that the average family in America spends 10.1% percent of the family’s income just on health insurance premiums and deductibles. So it’s no wonder that many Americans need a little help purchasing health insurance coverage. The Patient Protection and Affordable Care Act (ACA) made financial assistance available for people who buy health insurance in the marketplaces, based on their income level. However, due to uncertainty in politics, as well as policy and legislative changes, that financial assistance may be in jeopardy.
There are two different types of financial assistance in the marketplaces:
- Premium tax credits reduce the amount that people pay for their monthly premiums to have health insurance.
- Cost-sharing subsidies, also known as cost-sharing reductions, help to lower deductibles, co-payments and co-insurance. The way that cost-sharing subsides work is that the insurance company reduces what they charge individuals and, in turn, the insurance companies are reimbursed by the federal government.
Since the beginning of the year, uncertainty has put these financial assistance options in jeopardy. The new presidential administration had suggested that they were going to eliminate the cost-sharing reductions and that they would repeal the ACA, which would eliminate the premium tax credits, as well.
While health insurance companies are accustomed to dealing with uncertainty, like not knowing how many people will get sick during a given year, it is unusual for politics to create such uncertainly in the health insurance market.
Specifically, the uncertainty that will have the greatest impact is the fact that there has not be a clear decision from the President or Congress on if they are going to continue funding the cost-sharing reduction payments to insurance companies, and whether the individual mandate will be strictly enforced. The individual mandate was designed to insure that individuals do not wait to purchase insurance once they are sick. The IRS has already indicated that they will not strictly enforce the mandate moving forward.
Oliver Wyman, an actuarial consultant, states that these sort of ambiguities are new to actuaries who are in charge of setting the rates, and actuaries are predicting that 2018 insurance premiums are expected to increase between 28 and 40%.
Ultimately, the uncertainty around cost-sharing reduction payments, and the lack of enforcement of the individual mandate is projected to be responsible for the bulk of premium increases for 2018 and has already led some insurers to pull out of the marketplaces in some states, to avoid having to deal with the uncertainty.
This uncertainly, along with the current proposals for health care reform being discussed in the U.S. Senate, have the potentially to significantly impact the cancer community.
Stay tuned to our blog for the latest updates on proposed changes to our health care system.