In my last blog “Better Benefits Less Cost”, I discussed the concept of Risk Pools. One on the ways to reduce premiums is to spread the risk of the high benefit users over greater number of low to no use premium payers.
The healthcare reform law states that in 2014 the insurance companies will have to accept everyone without regard of pre-existing conditions. Most experts believe that this will increase the amount of unhealthy into the system.
On the other hand, the individual mandate is suppose to increase the overall pool with healthy premium payers. These are the individuals that could currently get insurance today and choose not to. So why would they? The Supreme Court ruled that if they do not, then they could be charge a tax.
The starting point for tax in 2014 is $95 per year. So will the young healthy person choose to pay the premiums of the tax? Well if the health insurance premium continues to cost around $100+ month for the young person, which do you think they would choose? Even when the tax increased to $295 per year, would they choose the tax or the premium?
This scenario is why many experts expect the rates to increase: more unhealthy people in plans without the large number of healthy people to offset the costs.
Monday, August 27, 2012
Friday, August 24, 2012
Better Benefits Less Cost
I am often approached by people who say that say they are excited that in 2014 healthcare reform will provide better plans for less money. I assume that by better plans they mean more benefits.
When I hear that I simply scratch my head. Insurance is a risk pool, which means that lots of people put in a little amount of money to cover large expenses for a few. As far as health insurance goes I hear that only about 8% are the heavy users that account for over 90% of the costs.
The Affordable Care Act has already set the Medical Loss Ratio (the amount insurance companies can use to administer policies) at 20% for individual and small group plans and 15% for large groups plans. With that in mind, premiums are continuing to rise. And when you hear about rebates (normally in other states) they are far less that the annual premium increase.
Then if you increase the benefits that are being paid out by the insurance company, what will happen to premiums? They have to go up.
The solutions are getting more healthy (not using benefits) people into the system or reduce benefits paid (reduced services or reduced payments to providers). We will discuss getting the healthy to buy insurance and reducing payments in the future blogs.
When I hear that I simply scratch my head. Insurance is a risk pool, which means that lots of people put in a little amount of money to cover large expenses for a few. As far as health insurance goes I hear that only about 8% are the heavy users that account for over 90% of the costs.
The Affordable Care Act has already set the Medical Loss Ratio (the amount insurance companies can use to administer policies) at 20% for individual and small group plans and 15% for large groups plans. With that in mind, premiums are continuing to rise. And when you hear about rebates (normally in other states) they are far less that the annual premium increase.
Then if you increase the benefits that are being paid out by the insurance company, what will happen to premiums? They have to go up.
The solutions are getting more healthy (not using benefits) people into the system or reduce benefits paid (reduced services or reduced payments to providers). We will discuss getting the healthy to buy insurance and reducing payments in the future blogs.
Wednesday, August 22, 2012
Who’s going to pay for health reform’s taxes?
Who’s going to pay for health reform’s taxes?
Here the taxes, who pays them, and when it goes into effect.Higher Income Individuals & Families
Who pays: About 2.5 million households — individuals making more than $200,000 per year, couples $250,000.
How much: A 0.9 percent Medicare tax on wages above those threshold amounts; an additional 3.8 percent tax on investment income.
When: 2013
Artificial-sun worshippers
Who pays: The 28 million people who visit tanning booths and beds each year — most of them women under 30, according to the Journal of the American Academy of Dermatology.
How much: A 10 percent tax on the price of tanning.
When: Took effect in 2010.
'Cadillacs' coverage
Who pays: Insurance companies or businesses that provide plans with premiums of more than $10,200 per person or $27,500 per family, not including dental or vision coverage.
How much: 40 percent excise tax on any amount of premium that exceeds the threshold.
When: 2018
Health industry
Who pays: Insurers, drug companies, medical device makers. And some of their customers.
How much: More than $165 billion over 10 years
When: Began last year for drug companies; starts in 2013 for device makers, 2014 for insurance companies.
Comment: How will this reduce costs for consumers?
Flexible Spending Accounts
Who pays: People who set aside tax-free savings to pay for health care.
How much: About $33 billion over 10 years
When: Contribution limit begins in 2013.
Comment: if you are big user of these accounts, you will have use after tax dollars for these treaments.
Taxpayers who take write-offs
Who pays: People with big medical or dental bills who itemize deductions.
How much: Taxpayers have to spend more than 7.5 percent of their adjusted gross income on medical care to qualify for a deduction. The threshold will rise to 10 percent. So a household with income of $50,000 would have to spend $5,000 on health care before deducting amounts above that.
When: 2013 (delayed until 2017 for taxpayers age 65 or over)
Comment: Like the Flexible Spending Account reduction, people to use their plans (the sick) are unfortunately losing tax breaks. Why?
Information was obtained from the following article: http://Here the taxes, who pays them, and when it goes into effect. ?
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