Guaranteed Issue coverage and Health Reform

By far, the biggest change accompanying health reform (aside from pricing) is the new guaranteed issue status afforded on the individual and family health insurance market in California. As with all things that are sweeping in change, there are pro\’s and con\’s to look at and we\’ll discuss those here. Starting Jan 1st, 2014, most California health plans will be guaranteed issue. What does this mean?

Say Goodbye to the health history questionnaire on the health application

Most of you are responding \”And good riddance\”. People will no longer need to qualify based on health which has been the case since…well since the inception of individual health plans in California. To many people who have dealt with the frustration of qualifying for coverage or receiving higher rates (not to mention declinations), this is great news and we agree. As insurance agents, there\’s no news we hate giving more than a declination or a higher tiered rate. Effective Jan 1st, 2014, not only will all eligible people be able to choose a private market plan but the rates cannot go up based on health. This is also true for group health insurance plans in California which allowed certain group\’s rates to increase or decrease by 10% based on the health of the group. So that\’s the good news and it\’s good news indeed. Is there any downside?

Costs are going up

The general rule of thumb in California has always been that individual or family plans were always about half the cost when compared with group health plans for comparable coverage. Why the difference in cost if the ages, area, and demographic constraints are all the same? Group health plans in California have been guaranteed issue for a while now (since AB1672). We fully expect individual family plans to come up to group rates with the advent of guaranteed issued coverage and then some. Individual health plans always had less rich benefits than group plans for a reason. The person paying for the coverage was the insured. This tends to favor a reduction in benefits and costs especially under the weight of a decade of constant rate increases. This will no longer be the case as benefits are now mandated to be at a certain level (the so-called metallics) and they will definitely be richer on average than what individuals and families in California actually purchase now. This will also affect the prices people pay and the carriers are now warning about a \”rate shock\” for the new Exchange plans effective Jan 1st 2014 with increases above what people are paying now by 30-50% higher. That\’s a big hit and since the MLR is already fixed (MLR is the percentage of premium that must go out to health care directly), we can only assume that these increases are due to guaranteed, richer mandated benefits, 3-1 rate compression, and just general medical inflation which increases unabated.

The good repercussions of Guaranteed Issue

We expect to see many of the bandaid fixes for people who were unable to qualify for coverage to go away. This includes HIPAA, PCIP, MRMIP, and to some extent Cobra. We also expect to see many small family group plans move over to individual since many mom and pops went group because they were unable to qualify based on health for California individual and family health coverage. We can all agree that no one will miss the application health history section. We\’ll have to reconvene on the costs that come with it.

Dennis Jarvis is a licensed California health insurance agent with extensive knowledge of the Individual California health market. California health insurance Eligibility and Reform

Dennis Jarvis is a licensed California health insurance agent with extensive knowledge of the Individual and Small Group California health insurance market. http://www.calhealth.net

Author Bio: Dennis Jarvis is a licensed California health insurance agent with extensive knowledge of the Individual California health market. California health insurance Eligibility and Reform

Category: Finances
Keywords: california health insurance,california health reform,california health exchange,california health