When President Obama signed the Affordable Care Act into law, he hoped it would help give everyone higher-quality affordable health insurance. But now that Obamacare is much closer to taking full effect, millions of Americans who already have health insurance are worried about whether they'll be able to keep their current policies under Obamacare, and if so, whether they'll have to accept changes in coverage or pay more for their benefits.
How Obamacare will affect your current policy depends on what kind of coverage you have. Let's look at the two main scenarios people face with their health insurance under Obamacare.
President Obama signing Obamacare into law. Source: White House on Flickr.
Scenario 1: You have individual coverage rather than a policy provided by an employer.
Individual health insurance has long been a financial minefield for those who don't get coverage from an employer. Because relatively few people have to resort to the individual plan market for their insurance, prices tend to be high, and benefits are often limited, with high out-of-pocket maximums and deductibles.
Obamacare requires insurance companies to provide a certain baseline minimum of coverage that goes beyond what more than half of all existing individual policies currently provide. That means that to offer individual insurance under Obamacare, some insurers will have to offer more benefits than they currently do, with costs likely to increase as a result. In addition, with requirements to cover those with pre-existing conditions, some companies are simply choosing to get out of insurance markets in some states entirely. Over the past month, UnitedHealth Group (UNH +0.94%) and Aetna (AET +0.00%) both said they would stop offering individual policies in California, forcing 58,000 existing policyholders to seek alternatives.
Ultimately, the impact will depend on which state you live in and what choices are available under the health-insurance exchanges that states and the federal government are setting up. For instance, in Vermont, rates will remain about the same under Obamacare, in part because the state already offers benefits that are similar to Obamacare's provisions. States with lower-quality plans now will probably see increased costs as insurers add required provisions under the health-care law.
Scenario 2: You have employer coverage.
If you already have coverage through work, then the odds are much better that it's of high-enough quality to avoid any major changes. A study last year found that almost two-thirds of employees who had group coverage at work had policies that would cover 80% or more of their health-care costs, compared with just 2% of individual health-insurance policies. Under Obamacare, adequate insurance need cover only 60% of allowed medical expenses to avoid penalties, which has spurred many small and mid-sized employers to look at high-deductible health plans with fairly high upfront deductibles and lower premiums. According to a Kaiser Family Foundation survey, almost a quarter of those covered by employers with fewer than 200 employees had HDHPs, compared with 17% at larger employers. Such moves will probably continue, as both employees and employers seek to reduce their premium costs.
The bigger potential impact on employees could come from employers that take more dramatic steps to avoid providing insurance at all. Darden Restaurants (DRI +0.62%) is one of many restaurant chains that has looked at increasing the number of part-time employees they hire to avoid the 30-hour-a-week threshold that triggers Obamacare insurance requirements. Theater operator Regal Entertainment (NYSE: RGC) reduced hours for many of its hourly employees back in April, citing the need to comply with the health-care law. Yet convenience-store operator Cumberland Gulf Group has said it plans to convert 1,500 of its employees to full-time status and provide health-insurance benefits in an attempt to attract higher-quality workers.
Net-net, until this give-and-take in the labor market gets resolved, both current employees and new hires will face massive uncertainty in their health-care costs. Moreover, now that the Obama administration has delayed employer penalties until 2015, workers probably have another year to wait before they'll know what happens on the employer front.
Waiting for the dust to settle
Unfortunately, even with important Obamacare provisions taking effect within the next few months, there's still a lot of uncertainty about how states and the federal government will coordinate to meet the law's requirements. Until they figure things out, it'll be impossible for you to predict for sure exactly how Obamacare will affect your insurance.
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