The tax credits are available only for those who get coverage through the new state insurance exchanges. The amount of the tax credit – which is based on income – is revealed after submitting an online application. The money is sent directly to the applicant’s insurance company to be applied to the premiums.
Young adults who don’t qualify for the tax credit but can’t afford individual coverage will have access to “catastrophic plans,” with lower premiums.
Small group coverage
Individual circumstances will determine whether premiums rise or fall next year for people with small-group or small-employer coverage.
“Groups that are made up of younger, healthy males will tend to have higher rate increases than those groups who are unhealthy or are comprised mainly of older people,” O’Connor said.
And low-cost, small-group plans will see the greatest premium increases, “while those with the greatest decreases will be the high-cost groups,” according to recent congressional testimony by Cori Uccello, a senior health fellow at the American Academy of Actuaries.
The health care law requires that deductibles for small-group plans in 2014 not exceed $2,000 for individuals and $4,000 for families.
While people with individual policies and workers with small-group coverage will experience the biggest cost changes next year, the 125 million other Americans with job-based insurance won’t escape unscathed.
The law imposes taxes on the insurance, pharmaceutical and medical device industries to help pay for expanded Medicaid coverage and premium subsidies. Because they’re nondeductible, those taxes, or a portion of them, very likely will be passed on to all consumers with work-based coverage in the form of higher insurance premiums.
Other factors that will affect premiums next year include geographic cost differences, whether large swaths of employers decide to drop coverage, and the demographics and health status of people who do drop job-based insurance for individual coverage.
The wide range of possibilities underscores the difficulty insurers face in trying to synthesize the new rules, predict their effects and price their products competitively and accurately.
Earl Pomeroy, a former North Dakota Democratic congressman and state insurance commissioner, said insurance companies were facing “the most complicated rating challenge” that he’d ever seen.
“It involves the great unknown,” Pomeroy said. “New systems, new market structures and behavior responses from the population that will be impossible to predict."