In Part One of Toonari’s Affordable Care Act series, we gave an overview of the law’s structure. In Part Two, we will begin to review the benefits as stated in the law, and their possible implications. The provisions we will review first are two that will be at the forefront of the President’s campaign stump speeches. These are benefits related to children and preexisting conditions.
Children Can Stay On

Before the 2008 recession, this is a benefit that would not have been a big deal for most parents. In the wake of the recession and Millennials moving back home in droves, it has become a more frequent problem. Before the ACA, children could remain on their parent’s health insurance plans until some time between age 21 and 24; it varied from state to state.

Now under the ACA, children can remain on their parents plan until age 26. This is something that many parents like, and sounds good on the campaign trail. For parents with kids with serious, ongoing chronic illnesses this also relieves, in theory, some of the stress of approaching health care costs. This is a catch gap designed to be a bridge between now, and when the preexisting condition benefits kick-in, in 2014.

Implications

The consequences of this change are minute. It is true that some people have a philosophical problem with what could be seen as further coddling of young adults, the reality is the difference between 24 and 26 is small. Keeping kids on the parent’s plans for a couple of extra years does increase the risk of higher and more medical payouts for the insurance companies, but most people at age 26 do not go to the doctor that often. In addition, the parents still have to pay the extra premium they were paying for their kids remaining on their plan for a few more years.

That is added income to the insurance company. Basically this is a wash. The one caveat to this is that one of the benefits mandated by the ACA (more in this later in the series) is the coverage of birth control costs with no co-pay. Young adults are typically more sexually active so there will be an increase in costs to the insurance company for that benefit, which will force an increase in premiums from the insurance company.

Premium increases are a subject we will return to again and again in this series about the ACA law. It is important to remember; health insurance companies do not have the power to tax the public. They pay their claims out of the earnings they make. When their expenses go up, they must charge more. This is not a matter of evil intentions. It is basic business 101. You must charge enough to cover your expenses. If expenses go up, then so must your prices.

Pre-existing Conditions

This is the big one. The issue that pulls the most heart strings, and the one that most people agree upon. Starting in 2014 there will be no preexisting conditions limitations for anyone. Before the law, if you had a preexisting condition and were not on an employee health care plan, you would be denied coverage. The reason for this is simple. If you have diabetes, then you are a guaranteed expense for the insurance company.

Insurance is all about minimizing risk to cover as many people as possible, for as little as possible. That basic tenant of insurance planning is now off the table. Cancer, AIDS, asthma, congenital conditions, previous surgeries; it is unimportant what the condition is, you can now get coverage.

Implications

The possible and real implications for this are huge. On the consumer side, you do not have to worry about being denied coverage. The days of worrying about choosing bankruptcy over health care are now ostensibly over. On the insurance side, the costs will skyrocket. It is easy for many to say, “Life before profits, or money” but that is because they are not the ones writing the check to cover the costs. One of the main selling points politically was that the ACA would reduce costs of health insurance and health care expenses.

This is one component of the law that makes that claim hard to reach. Millions of people who are very sick will now have coverage. This is a good thing. However, this will prove to be a bad thing fiscally. As the law settles in (assuming an Obama victory in November), costs for premiums and actual care will move up under the law. At some point cost containment measures will have to be looked at, which could mean rationing of care.

The other implication is that many Americans will opt not to buy insurance and just pay the penalty, because it is less money then annual premiums for the insurance. If they do get sick, or need an expensive surgery, they can just sign up for the coverage after they find out what they need. The scenario painted by conservatives is the picture of a person signing up for the plan in an ambulance on the patient’s way to a hospital.

The image is extreme, but it is also true. A person can do that. The law has no provisions in it to keep people from waiting till they know they need to sign up, and then dropping coverage once the medical situation is treated.

This will also have an effect of increasing costs, but also limiting the funds necessary to run the plan, as those missing premiums will affect the balance sheets of the insurance companies and cause higher premiums.

In our next installment, we will review the health care cost limitations, and preventative care provisions.

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