A Market ‘Fundamentally Changed’: How Health Proposals Could Affect Americans Who Buy Their Own Insurance

Who will benefit – and who won’t – if Congress overhauls America’s health-care system?

So far, there are two main proposals being debated on Capitol Hill: one authored by the Senate Health, Education, Labor and Pensions Committee and a similar one being put together by House Democrats. Still to act: the Senate Finance Committee, whose approach could differ significantly.

Whatever the details, it’s likely that any overhaul would target the individual insurance market, where 17 million people buy their own policies because they don’t get coverage through their jobs, are unemployed or are early retirees.

That type of coverage can be expensive and hard to get, especially for people who are older or have preexisting conditions. New rules being debated on Capitol Hill would mean consumers couldn’t be rejected because they have health problems, take prescription drugs or are disabled. Insurance marketplaces, called exchanges, would offer a range of policies, possibly including a public or government-run option. Government subsidies would help millions of people buy insurance. And nearly all Americans would be required to have insurance or face a penalty for opting not to do so.

“This will fundamentally change the insurance industry everywhere in the U.S.,” says Mila Kofman, superintendant of insurance in Maine.

Still, the proposals, which come with an estimated trillion-dollar price tag over 10 years, wouldn’t solve all the problems faced by the millions of people who buy their own coverage. Some could still face big out-of-pocket expenses. Others would earn too much to qualify for a subsidy. Premiums would probably continue to rise.

Following are examples of some problems faced by families across the country – and what the current proposals might mean to them.

 

A Market 'Fundamentally Changed': How Health Proposals Could Affect Americans Who Buy Their Own InsuranceJose Guevara and Flora Ana Granado of Mount Rainier, Md., don’t get insurance through their jobs, but do get help from a community health clinic. Their three children, Edith,15, Victor, 3, and Jose, 18, get coverage through the state’s Medicaid program, a joint state-federal health program for lower income residents. (Susan Biddle/Washington Post)


UNINSURED

Jose Guevara and Flora Ana Granado, Mount Rainier, Md. 

In a good year, bricklayer Guevara and his wife, who cleans offices, earn about $30,000. Their three children, ages 18, 15 and 3, are covered by Medicaid, the state-federal program for the poor. But when Jose and Flora applied for themselves several years ago, they were rejected because they were not legal permanent residents. (Both were born outside the United States.)

In 2005, they became legal but have not re-applied for Medicaid. Their combined income is still low enough to keep their children on Medicaid but is slightly more than Maryland’s cutoff for eligibility for parents, about $29,900 for a family of five. (In many states, the cutoff is lower.)

When Jose, 49, or Flora, 40, need to see a doctor, they rely on La Clinica del Pueblo, a community health clinic in the District, which charges patients on a sliding scale. Jose and Flora pay $20 for an office visit. They don’t have coverage for hospitalization. Jose says he’s not optimistic that proposals in Congress would do much to help families like his. “What I’m hearing is, the only benefit is for the people who are already earning a lot,” he says. Lawmakers, he says, should “help the people who need it the most, the poor people.”

What proposed reforms might do

The couple would probably be helped by a health-care overhaul. They would have to purchase insurance coverage, but because of their low income they would get a subsidy or might become eligible for Medicaid, which would be expanded significantly under the House and Senate health committee’s proposals.

If Medicaid is not an option, the couple would probably be eligible to buy insurance on the proposed exchanges with a subsidy from the government. Advocates of these exchanges, or marketplaces, say they would foster competition and restrain insurers’ prices; opponents say poorly designed exchanges could drive up costs or encourage employers to drop coverage.


SHARP PREMIUM INCREASES


Christine Duncan and Gerald Duncan, Denver?

In July, the Duncans, who run a small drafting firm, dropped health insurance coverage for themselves and their 20-year-old son after their insurer raised premiums to $766 a month from $706. The increase came amid a severe downturn in the couple’s business, which has been hit hard by the recession.

“We had nothing coming in during July,” says Christine, 53, who says the couple earned about $50,000 last year but will make much less this year.

In the 15 years they have been buying their own insurance, the Duncans have seen their premiums rise by 300 percent, she says. The July increase left them with a stark choice: Paying the mortgage or paying for insurance.

“We’re praying we don’t need any medical care,” she says.

What proposed reforms might do

If the Duncans earned what they did last year, which was about 275 percent of the federal poverty level for a family of three, they would qualify for a government subsidy to help them buy insurance. Under the House proposal, for example, they would pay a premium of no more than 9 percent of their income, or $375 a month.

Under that proposal, the Duncans would still face deductibles and co-payments, which could add substantially to their financial burden.

Their situation raises an important question: Would a health-care overhaul restrain fast-rising premiums?

Proponents say yes, claiming that reform would increase competition among insurers and slow health-care costs. Detractors aren’t so sure, saying some people might end up paying more than they do now. An amendment to the House plan would bar insurers from raising premiums by more than 150 percent of the rate of medical inflation each year, but it isn’t clear whether that provision will survive.

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HIGH OUT-OF-POCKET COSTS


David Sherry and Debbie Sherry, Green Bay, Wis.

Four years ago, David Sherry, now 59, took early retirement after working for the city of Green Bay for 34 years. He and his 57-year-old wife, whose job doesn’t offer insurance, decided to stay on the city’s health plan for retirees. They pay a premium of $1,025 a month.

Before the plan fully covers their medical care, they each must shell out $2,600 a year in deductibles and co-payments for hospital and doctor bills. All told, their premiums, deductibles and drug costs will total at least $18,400 this year. That’s about 28 percent of their $65,000 in income from Debbie’s office job, David’s pension and his part-time job at a car dealership.

The Sherrys had trouble paying their $5,200 in deductibles and co-payments last year, so they started a payment plan under which they paid $300 a month. But some providers threatened to report them to a collection agency, so they sold one of their remaining financial assets – some stock – to pay off the bill.

Late last year, David received a diagnosis of bladder cancer, and his wife is scheduled to have surgery on her parathyroid gland this month. Because of those health problems, the couple expects to confront the full deductible again this year.

“What are we going to sell off next year to pay our $5,000?” David asks. “The only way I’ll get a little reprieve is if I live until 65 and go on Medicare. Then my premium won’t be as much. Maybe I should have stayed working until I died.”

What proposed reforms might do

It isn’t clear whether the Sherrys would be helped by the legislation being debated in Congress. The House proposal requires insurers to limit a family’s out-of-pocket payments to $10,000 annually. That’s about twice what the Sherrys are paying now. Insurers, of course, could offer policies with lower limits, but premiums would be higher.

Given their income, the Sherrys would not qualify for a government subsidy to help them purchase coverage. They could be helped, however, by a proposal to ban insurers from rejecting people with preexisting medical conditions. That would allow them to shop around for a better deal. (If they tried now, their applications would probably be rejected because of their health problems.)

Finding a lower-cost policy could still prove difficult and might depend on whether the proposed insurance exchanges create enough competition to restrain prices.

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PREMIUMS ROSE WITH AGE

Robert Tollis, Hartford, Conn.

Soon after turning 50 in January, Tollis got an unwelcome surprise: His health insurance premium jumped to $575 from $367 a month. Thinking it was a mistake, Tollis called his insurer and was told he had just entered a new, more expensive age bracket.

To lower his monthly bill, Tollis asked whether he could switch from his current plan, which has a deductible of $1,500 a year, to one with a higher deductible. He was told he would have to apply for a new policy. When he did, he was rejected because he’s HIV-positive. The bottom line: He can’t buy a cheaper policy from the insurer he has been with for 10 years, and he’d probably be rejected by any other insurer. For now, he has kept his current coverage.

This summer, Connecticut insurance officials approved a rate increase that will allow his insurer to raise his rates by a further 16 percent in January. Tollis says that increase makes it unlikely that he’ll be able to continue buying insurance.

“I haven’t been uninsured for 30 years,” he says. “I can’t believe after 30 years of paying into the system they’re going to force me to become uninsured.”

What proposed reforms might do

People such as Tollis might not see such large increases in premiums if a health-care overhaul goes through. Currently, insurers often ratchet up premiums for people when they turn 45 or 50, policy experts say. Some states have limits on how big that increase can be, but most don’t.

Under the House proposal, insurers could charge older customers no more than double what they charge younger ones. Insurers object, saying the result would be higher premiums for younger people; they want to be able to charge older people up to five times as much. The bar on rejecting applicants with preexisting medical conditions would also mean Tollis could shop around for more economical coverage.

 


A Market 'Fundamentally Changed': How Health Proposals Could Affect Americans Who Buy Their Own Insurance

Sara Ellen Minor, 46, and Blaine Minor, 45, of Dalton, Georgia and their kids, Kathleen and Benjamin. The Minors face high out-of-pocket costs that include fees for non-network doctors and hospitals.

OUT-OF-NETWORK FEES

Sara Ellen Minor and Blaine Minor, Dalton, Ga.

The Minors’ two children have serious illnesses: Their 15-year-old daughter has Crohn’s disease, a chronic inflammatory problem of the intestines, while their 12-year-old son has celiac disease, a digestive disorder. The parents felt the children needed treatment from pediatric specialists outside their insurance plan, which has a relatively small network.

Their policy includes a special annual deductible for non-network doctors and hospitals that totals $5,000 for each family member, or a maximum of $15,000. After that, their insurance begins to cover part of the cost.

The family, whose income is between $100,000 and $120,000 a year, has a policy with a premium of $1,100 a month. Besides out-of-network deductibles, the policy has in-network deductibles that total $2,500 per person, or a maximum of $7,500, before coverage begins. Sara, 46, estimates that out-of-network costs and in-network deductibles come to $6,000 to $7,000 a year.

“This is where my savings and my children’s college money is going each month,” she says. “These costs are crippling our family; I can only imagine what other families must be experiencing.”

What proposed reforms might do

Exchanges set up to allow the self-employed to purchase coverage could result in more insurance options for families such as the Minors. The proposals before Congress require insurers to provide “adequate” networks of doctors and hospitals. In addition, the ban on insurers’ rejecting applicants with preexisting medical problems could allow them to qualify for a different plan. But there is nothing in the proposals that would specifically cap out-of-network charges. The family earns too much to qualify for subsidies.

A Market 'Fundamentally Changed': How Health Proposals Could Affect Americans Who Buy Their Own Insurance

Bill Inslee and his wife, Rosemary Sack-Inslee, run an antique business in Coatesville, Penn. They recently dropped their health insurance.

PREEXISTING CONDITION

Bill Inslee and Rosemary Sack Inslee, Coatesville, Pa. ?

After buying their own health insurance for more than a decade, antiques dealers Bill Inslee, 60, and his wife, Rosemary, 56, recently canceled it, making a risky bet that they’ll be able to stay healthy and avoid big medical costs. With their business declining, they say they couldn’t justify paying $12,000 a year in premiums and another $5,000 in deductibles. Plus, Bill wasn’t covered for any potential prostate problems because of several biopsies he had starting two decades ago – even though the results were negative.

“All in all, I didn’t see the distinct benefit” of the insurance, he says. “I’m going to try to live four more years and get on Medicare.” His wife won’t be covered until she turns 65, so Bill says they may consider trying to find a policy that would cover just her.

What proposed reforms might do

Overhaul proposals would bar insurers from excluding preexisting conditions from coverage, so Bill could get full coverage, including for any problems involving his prostate. The proposals also bar insurers from rejecting people with health conditions who apply for individual coverage, so the Inslees could shop around for another carrier, if they chose.