NCPA - National Center for Policy Analysis

Affordable Health Plans Are an Endangered Species

January 21, 2011

Beginning in 2014, most U.S. residents will be required to have health insurance coverage.  However, provisions of the new Affordable Care Act (ACA) will limit the choice of health plans offered.  Health insurance that does not cover preventive care, plans with deductibles above the statutory limit and plans that cap benefits at predetermined levels will ultimately disappear, says Devon M. Herrick, a senior fellow with the National Center for Policy Analysis.

  • After the individual mandate goes into effect on January 1, 2014, the ACA limits the deductibles of most policies sold to no more than $5,950 per individual or $11,900 per family (adjusted annually for inflation).
  • Health plans must also provide a costly essential benefit package that covers preventive services with no cost sharing.
  • Moreover, in 2014, all plans must, at a minimum, cover 60 percent of all medical costs with no lifetime or annual caps on benefits.
  • Insurers selling coverage in the individual market will also be prevented from charging applicants with pre-existing conditions more than healthy applicants, and limits will be placed on how much premiums can differ between older applicants and younger ones.
  • New medical loss ratio regulations will also place constraints on insurers.

Neither limited benefit plans nor high-deductible plans can meet the new requirements without raising premiums to an unaffordable level.  Without waivers that allow enrollees to retain their current plans, modestly-priced health insurance that caps benefits or only insures against catastrophic illness will be banned from the marketplace.  As a result, many people will lose coverage and join the ranks of the uninsured, says Herrick.

Insurance that features limited benefits in return for a lower premium is not for everyone.  But these plans are more affordable for many Americans and provide a level of benefits many Americans find sufficient.  The ACA mandates plans that are likely to price those Americans out of health coverage altogether.

Source: Devon M. Herrick, "Affordable Health Plans Are an Endangered Species," National Center for Policy Analysis, January 21, 2011.

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