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Health Care Reform – Community Rating, Penatlies and Affordability

By July 20, 2013June 8th, 2020Insurance

Now that health care reform requires health insurance companies to offer coverage to all people and all businesses it has also introduced new rules for community rating. Community rating means insurance companies can’t base rates on a persons health history. They must now base rates on age, tobacco use*, family size and location. All individual consumers in a state will be in one risk pool and the rates will be based on the health risk of the entire pool . Those rates can vary based on age, tobacco use*, family size and location. The risk and cost is now shared among everyone in the pool. The new law prevents insurance companies from creating separate risk pools that charge higher or lower rates. The law also limits how much the coverage can cost. The highest rate can’t be more than three times the lowest rate for a pool of people. Carriers are unsure as to whether rates will go up or down. This will be subject to the overall performance of the entire pool and whether healthy consumer enroll or decide to take the penalty.

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Open enrollment for individuals starts October 1, 2013 and plan coverage can start as early as January 1, 2014. The affordable care act requires people who live in the US legally to buy a minimum amount of health insurance coverage, unless they qualify for an exemption. Failure to purchase individual health insurance will result in a tax penalty for not having a minimum amount of coverage. That penalty is about $95 or 1% of taxable income in 2014. The penalty will increase each year. The government will request information about your health insurance coverage when you file your income taxes with the IRS. Health insurance coverage can be under an employer’s plan, an exchange plan, a Medicare or Medicaid plan or you can also buy  coverage directly from an insurer through the traditional market. Individuals may qualify for the governments free or low cost health insurance programs. These programs include Medicare which is for people 65 or older, Medicaid helps people with low income. You can qualify for a credit or subsidy when buying insurance through the insurance exchange if 1.) You’re an individual making between $11,490-$45,960 or a family of four making $23,550-$94,200. 2.)You don’t get coverage at work or have access to affordable coverage, this means your plan can’t cost more than 9.5% of your income.

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* Tobacco use may not impact the rates in some states


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