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.
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