NCPA - National Center for Policy Analysis

Insurance Plans Fall Short of Health Law Standards

June 1, 2012

More than half of the nation's insurance plans for individuals do not meet the minimum standards of coverage set by the Affordable Care Act, according to a new report by researchers at the University of Chicago and Towers Watson, a risk-management research organization.  In contrast, the study found that most group plans do meet the standards of the act, says the Pew Center on the States.

  • The study analyzed individual and group insurance data from 2010 for more than 2,000 public and private employers in five states: California, Pennsylvania, Florida, Utah and Michigan.
  • These states make up about 31 percent of enrollment in the U.S. insurance market.
  • Under the Affordable Care Act, health plans sold through the new state exchanges that will be operational by 2014 must cover at least 60 percent of health costs.
  • The average group plan in 2010 covered 83 percent of costs, but a majority of the individual plans were under 60 percent.

The differences in average annual out-of-pocket expenses were striking.

  • For a family with group coverage, the average out-of-pocket expenses were about $1,765 per year (not including premiums), compared with $4,127 per year for people with individual coverage.
  • A family in the top 1 percent of medical spenders with an individual plan could end up paying more than $27,000 per year in out-of-pocket medical expenses.

The authors note that the differences between individual and group plans will have significant policy implications going forward.  Under the Affordable Care Act, insurers will have to lower deductibles on individual plans to qualify for inclusion in state exchanges.  The study did not analyze the initial cost of new plans to employers or to individuals.

Source: Maggie Clark, "Insurance Plans Fall Short of Health Law Standards," Pew Center on the States, May 29, 2012.  Jon R. Gabel et al., "More Than Half of Individual Health Plans Offer Coverage That Falls Short of What Can Be Sold Through Exchanges as of 2014," Commonwealth Fund, May 23, 2012.

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