National Association of Insurance and Financial Advisors

Guaranteed Coverage (ACA)

Under the Patient Protection and Affordable Care Act (ACA), individuals are guaranteed coverage regardless of potential preexisting conditions that might have otherwise limited coverage. A concern regarding this policy is that individuals may wait until they become ill before seeking coverage, knowing that they cannot be turned down. This effect may be compounded by the fact that the fees imposed as purchasing incentives are commonly agreed by experts to be inadequate to encourage the purchase of insurance, often falling well below the expected alternative cost of premiums.

In a 2010 letter to Congressional leadership, the American Academy of Actuaries warned that, “to be effective, the penalties for not complying with the mandate must be meaningful compared to the premium faced.” To prevent significant premium increases, policymakers should revisit the issue of preexisting condition coverage, or consider revising purchasing incentive mechanisms to better encourage individuals to purchase insurance before they become ill.