First, Affordable Care Act (ACA) opponents charged that premiums for the new marketplace health plans would be too high, and consumers would face “rate shock.” But then states and federally facilitated marketplaces (FFMs) started to publish premium rates and they were actually lower than projected. So critics pivoted to a new argument, conceding that marketplace coverage might, indeed come with low premiums, but the trade-off would be high deductibles, high cost-sharing, and narrow networks.
Such claims neglect to mention that marketplace plans are actually a much better deal for most consumers, compared to what has, up to now, been available. Pre-ACA, consumers faced a “wild west” when buying health insurance, and many were shut out entirely because of high costs or pre-existing conditions. And for those that could buy coverage, it was often like swiss cheese – full of holes. What good is insurance that you can’t rely on when you get sick or injured?
As CHIR faculty documented in a recent report, Real Stories, Real Reforms, the insurance coverage that has been available to individuals buying it on their own falls far short of the typical employer-based plan. They have not only faced higher premiums than those with employer-offered coverage, but also much higher deductibles and other forms of cost-sharing, such as co-payments and coinsurance.
A Commonwealth Fund survey published in 2009 found that 60 percent of people with health problems reported it “very difficult” or “impossible” to find a plan with coverage they needed, compared to about one-third of respondents without a health problem. And in fact, over half of individual market plans sold today don’t meet the minimum coverage standards in the ACA. Before the ACA’s reforms went into effect, coverage on the individual market was inadequate for many reasons, including:
- Pre-existing condition exclusions. Before the ACA, insurers were allowed to permanently exclude from coverage any health problems that a consumer disclosed on their application for an individual policy. And, if a person filed a health care claim after enrolling in a plan, the insurer was allowed to investigate their health history and decide whether his or her condition was “pre-existing.” This happened to 22-year-old Kalwis Lo, who didn’t know he had cancer when he enrolled in his plan. But because his cancer was fairly advanced when it was diagnosed, his insurer refused to cover the claims, arguing that it must have been “pre-existing.”
- Limited Benefits. Insurers selling health insurance in the individual market often sell “stripped down” policies that do not cover benefits such as maternity care, prescription drugs, mental health, and substance abuse treatment services. For example, 20 percent of adults with individually purchased insurance lack coverage for prescription medicines, but only five percent of those with employer-based coverage do.
- High Out-of-Pocket Costs. Before the ACA, individual policies were often sold with high deductibles – $10,000 or more was not uncommon. And individual policies have been very low value, below the minimum prescribed by the ACA. For example, one California study found that individual policies pay for just 55 percent of the expenses for covered services, compared to 83 percent for small group health plans. It is hardly any wonder, then, that medical debt is a primary cause of personal bankruptcies, even for people with health insurance. Stacy Cook discovered how inadequate health insurance can be when she was diagnosed with breast cancer at age 28. Even though she had insurance, she’s still struggling to pay off almost $40,000 in chemotherapy and hospital bills.
Under the ACA, insurers are no longer allowed to impose pre-existing condition exclusions, and they have to provide comprehensive coverage of basic benefits like maternity, hospitalization, prescription drugs, and doctor visits. And there’s an annual cap on consumers’ total out-of-pocket costs ($6,350 for individual coverage, $12,700 for families). These reforms mean that insurance will do what it’s supposed to do: be there for them when they get sick or injured so they can get the care they need and be protected from financial harm.
Many of the marketplace plans will include deductibles and other forms of cost-sharing. Consumers need to shop around and decide what plan is right for them. But one thing is for sure – they’ll get a better deal than just about anything they could have gotten before.