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- insurance premiums represent the costs of a health insurance contract
- The contract then requires consumers to pay a minimum before getting insurance benefits
- The Insurance plans add cost sharing and copays to consumer expenses in addition to premiums
- Premiums represent the starting point for insurance costs
Obamacare does not set prices for insurance. It sets the standard that policies must meet in order to provide adequate protection for US families. Obamacare provides subsidies and tax credits to reduce the amount that consumers must pay per month to maintain health insurance coverage.
The tax credits provide payments to the insurers that cover part of the costs of insurance premiums. Obamacare does not increase premiums; it helps consumers afford the high costs charged by private insurance companies.
Comparison shopping is the best way to find high-value health insurance at the lowest prices available on the market. Comparison shopping can go beyond premiums to consider the overall costs of insurance and expenses.
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The individual mandate is the key to a national insurance program. It is the requirement that every eligible person must get and keep qualified health coverage. The mandate requires coverage or payment of the individual shared responsibility penalty.
The mandate is not absolute, people who do not meet the tax filing threshold do not have to get coverage. People with no taxable income such as Social Security for severely disabled people do not need coverage.
Qualified applicants can get an exemption for such situations as financial hardship.
The flip side of the individual mandate is universal acceptance. Insurance companies can no longer deny insurance coverage. They must cover applicants without regard to medical history and prior conditions. The costs of insurance were affected by this requirement because it increased the risks that insurance companies must take.
The law provided risk protection for the insurers by guaranteeing them against losses in the early years of the program. Nonetheless, many companies choose to raise prices in anticipation of high demand for services and high costs for services.
In many geographic areas, there is little or no competition. There are no market forces to drive insurance prices downward.
Private Companies Set Prices
The private insurance companies set the price of insurance. They determine the costs of a policy and the premiums are part of that cost decision. Insurance premiums pay for less than ever.
Premiums today represent the price for the insurance contract. The benefits require cost sharing and copayment. The benefits do not begin until the consumer pays a deductible amount.
The deductibles can be more than $7,100 per year for an individual, and that would render benefits unreachable for most insured consumers.
The Obamacare Marketplace offers health savings accounts to compensate for high deductibles, costs sharing assistance, and premium tax subsidies.
- Private companies develop insurance plans and set their prices.
- The Centers for Medicare and Medicaid review plans offered for sale on the federal marketplace using the warehouse approach.
- State governments review plans for sale on state exchanges some use active purchaser while others use the warehouse approach.
Comparison shopping is particularly important for consumers in active purchaser states like New York and California. The government has made a strong effort to contain prices, and the consumer can help by shopping wisely. The active purchaser gets involved in the
The active purchaser gets involved in the development stages of the insurance plans. They work with insurers to assess risks, estimated costs, and demand. In many cases, the active purchaser wins concessions and gets lower prices and higher value for their residents.
The CMS and most states use the warehouse approach to regulating private insurers. This method reviews plans for consistency with the Affordable Care Act and its rules.
It does not involve working crossly with the insurers when they shape their offers and develop their plans.
Some critics point to this practice as a lost opportunity to affect the rising costs of insurance. The Centers for Medicare and Medicaid appears to have changed its philosophy and may engage in greater depth of discussion when working with private insurers on Medicare and Medicaid as well as Obamacare Marketplace.
Click here to read more about Obamacare’s impact on Medicare.
The COOPs Promised Savings
The Affordable Care Act authorized and funded a program called the Consumer Operated and Oriented Plan. These were a series of grants to develop new health care providers and related entities. These non-profit companies would reinvest profits to make prices go down year after year.
The impact on the market could have been dramatic. It would have provided lower costs and competition for other private providers that tended to raise prices year after year.
The Republican-controlled Congress ultimately defunded the risk corridors after many of the COOPs had begun development and initial operations. Without the risk protection, most became untenable and ceased operations.
CMS began requiring an undertaking by Medicare Advantage providers to fill out an incomplete network by paying the usual fees paid by Original Medicare. They appear ready to ratchet up the oversight over Marketplace plans to resemble the active purchaser role that some states have used with success.
Is Medicaid the right choice for you? Click here to read learn about its eligibility requirements, benefits, application process and more.
Single Payer System
The original concept by the Obama Administration was to install a single payer system. The opponents, and primarily the insurance industry, were able to convince enough US senators to vote against it. The famous last vote to align against the single payer option was from Senator Lieberman of Connecticut.
The option is still worth consideration for cutting the costs of insurance. There simply needs to be more competitive pressure on the insurance companies. Some news articles point to the average salary of insurance CEOs in the tens of millions of dollars.
The overall volume of dollars that flow through the Medicare and Obamacare systems is more than $400 billion per year. Insurance payers handle a large percentage of health insurance spending, as only Original Medicare is a government-run program.
The Private Insurance Industry Sets Prices
Opponents of the Affordable Care Act have taken important pieces of the law and withheld funds and made the law work poorly in some respects. The political interference has ultimately caused higher prices, fewer plans, and less coverage.
Millions of Americans still lack coverage because of high prices and the refusal to use Medicaid Expansion. The COOPs promised downward pressure on prices and an innovative approach that was not aimed at reducing benefits and increasing profits.
Comparison shopping is an important tool against rising prices. Wise shoppers use comparison shopping to find the best fit for their needs.
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