Most individual health insurance isn't good enough for Obamacare

If you buy your own health insurance now, you'll be in for a big change when you sign up for coverage in 2014.

Just over half of the individual plans currently on the market do not meet the standards to be sold next year, when many key provisions of President Obama's Affordable Care Act kick in, according to a University of Chicago study. That's because the law sets new minimums for the basic coverage every individual health care plan must provide.

"They will offer a lot more financial protection," Jon Gabel, the report's lead author, said of the individual plans that will be available next year. His team drew its conclusions from 2010 data supplied by health insurers.

Some 15 million Americans, or about 6% of non-elderly adults, currently buy coverage on the individual market. Starting this fall, they'll be able to shop for and enroll in health insurance through state-based exchanges, with coverage taking effect in January. By 2016, some 24 million people will get insurance through the exchanges, while another 12 million will continue to get individual coverage outside of them, the Congressional Budget Office estimates.

Both groups will be affected by the new Obamacare rules. Starting next year, nearly all individual plans -- both in and out of the exchanges -- will be required to cover an array of "essential" services, including medication, maternity and mental health care. Many plans don't currently offer those benefits.

So what happens to the plans that don't meet the new minimum standards? They will likely disappear. A handful of existing plans will be grandfathered in, but the qualifying criteria for that is hard to meet: Members have to have been enrolled in the plan before the ACA passed in 2010, and the plan has to have maintained fairly steady co-pay, deductible and coverage rates until now.

The insurers in the Blue Cross Blue Shield Association are major players in the individual market. They are readying new product lineups for 2014, according to Kim Holland, the trade group's executive director of state affairs. She expects most existing Blue Cross individual plans to be discontinued.

"They are going by the wayside," she said. "Plans will have to conform to the higher level of benefits."

Consumers buying individual plans will be able to choose between four levels of coverage next year: platinum, gold, silver and bronze.

Platinum plans will carry the highest premiums but offer the lowest out-of-pocket expenses, with enrollees paying no more than 10%, on average. At the other end of the spectrum are bronze plans, which will have the lowest monthly premiums but higher deductibles and co-payments totaling up to 40% of out-of-pocket costs, on average. Starting in 2014, all Americans will be required to carry coverage or face fines. Those penalties start at $95 per adult or 1% of adjusted family income, whichever is greater, and escalate in later years.

People with annual income of up to 400% of the poverty line -- or roughly $45,000 for an individual and about $92,000 for a family of four -- will get federal subsidies to help defray the premium costs.

Most individual plans sold next year, even the lowest-level "bronze" plans, are likely to charge higher premiums than today's most bare-bones individual insurance. For many customers, though, those costs will be offset by lower out-of-pocket costs and more comprehensive coverage, said Karen Pollitz, a senior fellow at the Kaiser Family Foundation.

"Now, they buy a policy and when they get sick, they may go broke anyway because the policy leaves them with so much to pay," she said, noting that deductibles of $10,000 are not uncommon.

The insurance industry's trade group counters that some people may wind up with more coverage -- and higher monthly costs -- than they want. Some individuals may choose to simply pay the fine instead, said Robert Zirkelbach, a spokesman for America's Health Insurance Plans.

"Now, people can choose the plan that best meets their needs," Zirkelback said. Next year, "they may choose not to buy any coverage."

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