Why you may be paying more for your individual health insurance

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Charlie Lisky is a doctor who treats an assortment of illnesses and injuries in patients who sometimes cause him physical injury.

"I had my leg broke about four years ago," he says. "I got kicked in the femur."

Lisky, 55, is a veterinarian who treats large and sometimes unruly equine patients in Los Angeles and Ventura counties.  And because of that, he says, he’s always viewed health insurance as a necessity.

"I’m at a pretty good risk for getting hurt because I’m around horses all the time and stuff happens," he says. 

But Lisky is also healthy and has never suffered any serious illness. And that used to mean his monthly insurance premium was pretty reasonable – about $300 a month. Yet since January, when the Affordable Care Act began requiring nearly every American to have insurance or face a penalty, his premium and his deductible have more than doubled.

And he’s not alone.

While millions of Americans are celebrating their new low-cost insurance, others, like Lisky, have found they’re paying more for health insurance they buy on the individual market  – sometimes a lot more. 

"They’re generally self-employed individuals or small business owners," says Jerry Kominski, director of the UCLA Center for Health Policy Research. "Or they’re working for someone in a small firm who does not offer insurance coverage to them, so they buy the coverage on their own."

Kominski says experts estimate about a quarter of those who bought insurance on the individual market before this year are likely to be paying higher premiums today.  And there are several reasons for that, he says. 

One reason: they earn too much to qualify for the tax subsidies provided under the federal law.

Under the Affordable Care Act, only individuals who earn between $15,850 and $46,000 a year (and a family of four that earns between $32,500 to $94,000) qualify for federal tax credits that can be used to offset the cost of monthly premiums.  Those who earn more must pay full retail for their policies.

Patrick Johnston, CEO of the Association of California Health Plans, describes another key reason policies are more expensive today: "There are...more benefits than ever before for everybody."
 
Under the Affordable Care, those benefits are "essential benefits."  There are ten that must be included in nearly every individual and small group plan.  They include coverage for prescription drugs, hospitalization, mental health, and maternity care.  

Another reason for pricier premiums, Kominski says, is that the federal health law mandates consumer protections that didn't before exist in most policies.  

"The immediate experience that people have is they might be paying higher premiums this year but what they don't necessarily see immediately is the protection they now have against... catastrophic expenses," he says. 

That's because the health law no longer allows insurers to impose a limit on how much they'll pay for most benefits over the life of a health policy, whether you get your insurance from your employer or buy it yourself.

Additionally, the Affordable Care Act is phasing out all annual limits on coverage, except for grandfathered plans, which are those that existed before the federal health law was passed on March 23,  2010.

"These are advantages [to the new policies] that you may not experience immediately or in your lifetime if you have really good fortune," Kominski says. "But [hitting the benefit limit] happens to millions of Americans every year."
 
Most health policy experts agree that perhaps the most significant factor affecting the cost of premiums is the elimination of "medical underwriting," which is insurance-speak for the industry practice of refusing coverage to sick customers or of charging them substantially higher premiums than healthy customers.
 
Doing away with medical underwriting is a popular part of the health law, says Johnston. But he points out that it obligates insurers to cover those with serious medical issues, which drives up the cost of insurance for those who are healthy. 

Kominski agrees, saying that while the federal health law "leveled the playing field" by doing away with medical underwriting.

"And what the means is people who got their preferred customer discounts before, lost their preferred customer status," he says. 

People like Dr. Charlie Lisky, who says while he’s grateful that his family members and others who were once shut out of coverage now have it, he can only hope that the sticker shock he experiences with each month’s insurance bill will ultimately be worth it.

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