The Affordable Care Act restricts the number of variables that insurance companies can use to charge higher rates. The law permits five factors for increased charges. They are age, location, and smoking status, plan status, and coverage for dependents. States are free to limit the federally permitted range of increases for these factors. Before the ACA, evidence of a prior condition could disqualify an applicant for health insurance coverage. Prior conditions included a childbirth, and insurers routinely charged women more than men. Pregnancy was a disqualification event, and women had to find maternity policies that often left large gaps in coverage. Under the ACA, only age, location, and smoking status are permissible factors for higher premium charges. Choice of plan and family coverage options cause cost differences.
The Aging Factor
Age is always a factor, and as coverage years pass, subscribers can anticipate higher charges, up to three times the amount charged to young subscribers. Studies show that women use greater amounts of health care resources in younger years, and men use greater amounts on later years. Given little change in all other factors, age will cause higher premiums. Consumers who use comparison shopping can sometimes realize savings by changing plans to those with fewer deductibles and out of pocket expenses. Platinum plans can cover up to 90 percent of estimated healthcare costs and feature low deductibles. For those with frequent co-pays and prescription costs, platinum plans may be more cost effective.
The Tobacco Penalty
The ACA permits insurers to apply penalties for smokers. The ACA permits charges of up to 50 percent of the non-smoker premium. States can regulate the content of qualified health plans sold on their exchanges. States use either the active purchaser or passive review model, and have acted on this issue and limited the size of increases. The ACA treats smoking as a required treatment under the essential benefits. Smoking cessation in some form would be free to the subscribers. Smoking is a behavior that has been linked to many serious health conditions. Some argue that it may also qualify as an addiction. While few urge that efforts to stop smoking are wrong, many feel that paying more does not help the user stop smoking. However, there is no argument with the facts that show smoking contributes to high use of medical services and some of the most costly long-term treatment and therapies. Qualified health plans must offer smoking cessation programs and upon completion subscribers may qualify for reduced premiums.
The Location Factor
Location is a major determinant of rates. Location involves costs of living, inflationary factors, demands for health services and resources, and availability of resources. The base unit is usually a county. In making rates, population density is another important factor as rural, and low population rates add considerably to the costs of medical care.
The Plan Factor
The ACA groups plans into four tiers and assigns an actuarial value to each group. This value indicates the approximate percentage of estimated total costs of health care covered by the plans. Bronze category includes the benchmark plan for each area, and it has coverage ratio of sixty percent. Silver offers a seventy percent coverage rate, and gold plans cover eighty percent of costs. Platinum is the highest rated grouping with an actuarial value of ninety percent. In addition to basic coverage for individuals, some plans offer coverage for a spouse or dependent children. When added, coverage of dependents is a permissible basis for additional charges and premiums.
Incentives and Reductions
The policy of the ACA is to use incentives to encourage individuals and sponsoring companies to work to improve health and in exchange receive lower rates or other tax benefits. There is no statutory basis for charging more for many conditions that experts view as behavioral choices. For example, obesity is not a permissible category for higher charges, but there are numerous incentives for helping subscribers lose weight and adopt healthier lifestyles.