National Association of Insurance and Financial Advisors

Affordability (ACA)

The goal of the Patient Protection and Affordable Care Act (ACA) is to affordably expand insurance coverage to millions of Americans who have historically lacked coverage. This is a commendable goal shared by NAIFA. However, many of the ACA’s provisions, while increasing coverage, do so in an unsustainable manner that significantly increases the cost of coverage for consumers. The design of the ACA does little to encourage individuals from purchasing coverage, and particularly increases rates for younger, healthier individuals. These provisions, coupled with the ACA’s guaranteed coverage for preexisting conditions, discourages healthy individuals from purchasing insurance until they are ill or injured, thus leaving only high-risk individuals in the insurance pool. This significantly raises premiums or reduces coverage for everyone.

One of the largest expected drivers of premium increases will be the minimum Essential Health Benefits (EHB) required of Qualified Health Plans (QHP). The EHB require plans to cover a minimum of 10 categorical areas of coverage, provide a minimum value of coverage of 60 percent of premiums, and a cost-sharing structure that insulates individuals from high deductibles and premiums. Unfortunately, these provisions prevent flexibility that allows consumers to design a lower-cost plan that better meets their needs.
Other factors affecting affordability, either directly from the ACA or through subsequent regulation, include decreasing the age band rating, imposing new taxes and fees, limiting agent compensation, and restricting the ability to utilize high-deductible plans with HSAs and FSAs.
Policymakers can take steps to ensure the ACA more effectively reaches its intended goal by implementing a number of bipartisan revisions, including:
  • Remove agent compensation from  the Medical Loss Ratio (MLR) calculation;
  • Expand the age band ratings from a ratio of 3:1 to 5:1;
  • Allow increased flexibility on essential health benefits in insurance plans;
  • Reverse the sales tax on all private health insurance plans;
  • Enhance FSA and HSA use in conjunction with High-Deductible Health Plans;
  • Create greater incentive mechanisms for healthy individuals to purchase insurance;
  • Build upon employer-based health coverage.