The Health-Care Overhaul: What You Need to Know
By Anne Tergesen
Whatever its larger merits or shortcomings, the federal health-care overhaul seems likely to benefit one demographic group in particular: the 50-plus crowd.
Starting Oct. 1, state-based health-insurance exchanges created by the 2010 Patient Protection and Affordable Care Act will open for business. For those without access to insurance through work, or for the self-employed who have been buying coverage as sole proprietors, the exchanges will serve as clearinghouses for evaluating and buying health plans.
The policies, which will take effect Jan. 1, must cover 10 “essential benefits,” including preventative services, hospitalizations, mental health and prescription drugs. Notably, insurers can no longer exclude people with pre-existing conditions.
All that is good news for individuals ages 50 to 64, who typically have more health problems than those who are younger. (Most people become eligible for Medicare at age 65.) Twenty percent of the 50-to-64 demographic went without health insurance for at least part of 2012, up from 15% in 2005, says the Commonwealth Fund, a New York-based nonprofit that focuses on health-care issues. What’s more, between 20% and 29% of people in that age group, when they applied for health insurance, were rejected in 2008, the latest year for which figures are available, according to America’s Health Insurance Plans, a trade organization for health insurers.
Even older individuals who have insurance through work might benefit. Many would prefer to start a business, change employers or retire but are clinging to their jobs solely for health coverage.
The new law makes coverage easier to obtain, simply because “insurers no longer can turn you down,” says Karen Pollitz, a senior fellow at the Henry J. Kaiser Family Foundation, a Menlo Park, Calif.-based nonprofit that focuses on health-care issues.
Young Subsidize Old
Although the Obama administration recently gave employers subject to the law a one-year reprieve, to 2015, on a requirement that they provide coverage for workers or pay a penalty, nothing has changed for individuals: Many who aren’t eligible for coverage through an employer, Medicare or Medicaid must purchase a policy for 2014 or face tax penalties: the greater of $95 or 1% of income. (In 2016, the penalties are scheduled to rise to the greater of $695 per adult or 2.5% of income.)
The policies that take effect in January will offer more comprehensive coverage and greater financial protection than many plans on the individual market today, says Timothy Jost, a law professor at Washington and Lee University in Lexington, Va. That should help older consumers, who tend to spend more on health care, he adds.
Premiums are likely to fall for those in their 50s and 60s compared with what they pay for similar policies today, says Prof. Jost. With the exception of tobacco use, insurers can no longer charge higher premiums based on health status, nor can they charge the oldest consumers more than three times the average premium paid by a 21-year-old.
Linda Blumberg, a senior fellow at the Urban Institute, a nonprofit public-policy research organization in Washington, D.C., estimates that this 3-to-1 rule will, on average, save someone age 57 or older buying single coverage about $1,800 in annual premiums, considering that this age group currently pays an average of five times more.
“Early retirees will benefit most from the health-care law,” says Prof. Jost in Virginia. Younger, healthier people will “pay higher premiums to subsidize the rates of those who are older and sicker,” he adds.
Of course, the law’s critics say lower premiums for older adults are by no means a sure thing. If large numbers of younger, healthier people opt to pay penalties rather than buy insurance, that could drive up the cost of coverage in 2015 and beyond for those who remain in the market.
Also factoring into the premium equation are tax credits. Individuals with incomes of up to $45,960 and couples earning up to $62,040 may be eligible for tax credits that cap their premiums on a benchmark plan—designed to cover 70% of medical expenses—at between 2% and 9.5% of income. (The percentage rises with income; on plans with more generous coverage, the tax credit will cover a smaller share of the premium.) Because older people typically are charged higher premiums by insurers, they are more likely to benefit from these caps.
For example, a 55-year-old Denver resident who earns $45,000 a year and picks a policy that Anthem Blue Cross & Blue Shield plans to offer there for $597 a month would be eligible for $240 in monthly tax credits. A 27-year-old with the same salary and policy would pay $281 a month and receive no tax credits, according to the nonprofit Colorado Consumer Health Initiative.