Affordable Care Act Rate Shock?

Come January 1 of next year, those with the lowest health insurance risk may be hit the hardest with premium increases as high as 40%. “The rules are changing,” says Robert Zirkelbach, vice president of strategic communications for the American Health Insurance Plans (AHIP) in Washington, D.C.

If you are young, healthy and qualify for non-group coverage, you could face rate hikes forcing you to reconsider how you spend your health care dollars. Here’s what’s happening: The Affordable Care Act, aka Obamacare, reaches maturity the first of the year. Designed to tackle the problem of insuring the nation’s estimated 48 million uninsured in addition to increasing benefits for such services maternity care and reproductive aid—all while lowering premium rates for older Americans. But the new provisions come with a price.

And because of new age rating band requirements tied to the ACA, the 18 to 44 age group’s premiums will increase while the over 57 group will decrease. Today, the ratio for age rating bands is 5:1, which means insurers can charge older individuals five times more than younger insureds. Come January 1, the band ratio reduces to 3:1. Take, for example, a 24-year-old who pays $1,200 annually for non-group coverage today could. He could see an overnight increase to $1,800, while a 60-year-old paying $6,000 today will pay $5,400 in 2014, according to the AHIP.

Nonetheless, in the report “Timely Analysis of Immediate Health Policy Issues” published last month by the Urban Institute Health Policy Center in Washington, D.C., lead author Linda J. Blumberg concludes that such predictions are over inflated. Citing government subsidies available to help defray such increases for those earning less than 400% of the federal poverty level, Blumberg says that subsidies will help this age group obtain expanded coverage. Even so, according to the report, “Premiums for 21-to 27-year-olds are $850 lower under (the)5:1 (age band rating) than under (the)3:1 rating.”