It’s a new year and while that may not mean a new you, it might mean a change in your healthcare costs. As someone who recently purchased health insurance as an individual, I can attest to being surprised not only at the increase in my monthly premiums from what was offered last year (a little over 20%) but also a change in the level of care covered by the plan. As a consumer, I was disappointed, to say the least. As a financial advisor, I was curious. What exactly was changing and why? Furthermore, what did it mean for my clients, many of whom are retired and bear the burden of having to pay a significant portion, if not all, of their healthcare costs? As it turns out, the answers were not entirely clear.
The first thing I learned was that nobody agrees on just how much healthcare costs are rising. This makes sense given the complex structure of healthcare and everyone’s strong opinion about it. It turns out, how much your healthcare costs will rise depends not only on the type of plan you have but also who is insuring you and where you live. When the Affordable Care Act was passed, some insurance companies were more successful than others at anticipating the costs of taking on additional individuals. Other insurers weren’t as accurate when they did their math and as a result, have lost money and now need to significantly increase their premiums and/or change the structure of their plans to place more of the burden on consumers. In some instances, insurers have chosen to leave the marketplace entirely because they no longer find it profitable to do business there. As a result, many individuals will face a decrease in the number of insurers available to choose from in the ACA marketplace in 2017.
According to Consumer Reports, the U.S. Department of Health and Human Services expect premiums to increase on average about 25% in 2017, but what this “average” doesn’t tell us is that increases will drastically vary by location because demographics vary drastically by location. According to the Kaiser Family Foundation, individuals living in Indianapolis and Boston could actually see a decrease in premiums for the popular Silver Plan, while individuals living in Phoenix could see their premiums rise by upwards of 145%. You may be trembling at the thought of your plan potentially increasing by 145% (I know I am). Fortunately, for the majority of individuals buying in the marketplace (85%), these cost increases are mitigated by tax credits that offset the increase.
At this point, you may be wondering why this even matters? Our government is about to change hands and a lot of those new hands have vowed to repeal the Affordable Care Act. While it’s impossible to know what the future holds, it would be wise to anticipate a variety of outcomes. Certainly a lot of pledges have been made by politicians to get rid of the ACA, but at the same time there is a large portion of voting Americans who now have access to healthcare who didn’t before and the truth is, there isn’t an “edit-undo” button that makes repealing a law quick and painless. What we may see are alterations to the existing law such as loosening regulation and changes to what type of care is required to be covered. In the meantime, it’s probably a good idea for you as an educated consumer to be aware of whether or not your care is changing and if so, how. If you are in need of new coverage, go ahead and shop around. Spend some time researching what your options are and who offers the best plan in your area. Remember, it always pays to be informed and in a world where healthcare costs can take up a significant portion of your household budget, you can’t afford not to be.
(This article was originally published January 12, 2017 on our sister site The Cupcake Club).
Cox, Cynthia. “2017 Premium Changes and Insurer Participation in the Affordable Care Act’s Health Insurance Marketplaces.” KFF.org. Oct. 24, 2016. http://kff.org/health-reform/issue-brief/2017-premium-changes-and-insurer-participation-in-the-affordable-care-acts-health-insurance-marketplaces/.
Metcalf, Nancy. “Do Increases in Health Insurance Premiums Spell Doom for Obamacare? No, and Here’s Why.” Consumer Reports. Oct. 25, 2016.
Kocher, Bob and Roberts, Bryan. “Why Drug Costs Will Keep Rising in 2017.” Fortune. Dec. 20, 2016. http://fortune.com/2016/12/19/healthcare-drug-costs-2017-predictions/.