Free Riders

With the implementation of the Affordable Care Act (ACA), the rules for obtaining individual health coverage have changed significantly.  Before ACA changed the market on January 1 of this year, we could get coverage any time we could pass through medical underwriting with relatively good health.  Medical underwriting rules kept premium rates down and allowed insurers to cover 80-90% of the population.  Of course, those among us with severe health conditions and some with fairly minor pre-existing conditions could find themselves locked out of the market.  Now, with new ACA rules in place, insurers are prohibited from declining us for health conditions.

Putting aside the politics of ACA, most of us will agree that covering everyone is desirable and necessary.  But it’s not without costs.  Premiums and out-of-pocket costs have increased for most enrollees and the burdens of financing healthcare have been extended to both the federal government and to the broader population.

In an effort to flatten the premium increase curve that comes when underwriting is eliminated and coverage expanded, regulators have put in some safeguard enrollment guidelines to preserve the financial stability and premium integrity of the insurers.  With these new ACA rules, insurers sought and received protection against “Free Riders”.  A Free Rider is someone that waits until they’re sick or injured to buy health coverage.  This is the benefit industry equivalent of calling your agent and asking for full coverage car insurance minutes after wrecking your uninsured vehicle.  We laugh at the analogy, but it happens daily.  And in New York, it happened so often in the health insurance market that after pre-existing condition prohibitions were put in place in 1997, rates increased so much that individual health insurance nearly disappeared from the marketplace.  Government, consumers and industry learned a painful lesson on Free Rider behavior from New York.

Applying these lessons and the resulting rules to our new ACA regulated market, we have to have a Qualifying Life Event (QLE) or wait until the Annual Enrollment Period (AEP) in the fourth quarter (October 15 – December 7) to obtain or change coverage.  Marriage, divorce, job status change, child birth, subsidy eligibility or losing other creditable coverage are the only triggers to allow us to buy coverage outside of the Annual Enrollment Period.  These rules apply both on and off the marketplace exchange.

Put simply- with new ACA rules in place, delaying the purchase of health insurance because it’s inconvenient or expensive can leave us financially exposed to the full cost of healthcare until the next AEP lets us buy coverage.

If you have questions on the Affordable Care Act, Free Riders, or anything else related to health insurance and benefits, please contact a J.W. Terrill representative.

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About Kevin Guss

Kevin J. Guss is a Consultant with our Private Client Benefit Services, specializing in providing individual health coverage (on and off-exchange), Medicare supplements, life, LTC and disability insurance to clients of J.W. Terrill and strategic partners. With more than 22 years of industry experience, Kevin counts many retired professional athletes, celebrities, business leaders and prominent members of the community among his clients. He has a Group Benefits Associate designation from the Wharton School of the University of Pennsylvania, a Past President of St Louis Association of Health Underwriters and a current board member of the MO Association of Health Underwriters.

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