With health insurance law, premiums to change for many

When Florida officials declared that premiums for individual health plans could spike 40 percent due to the federal health reform law, David Payne was startled.

Not by the projected increase but by the Florida Office of Insurance Regulation statement showing insurers expect to charge an average of $278 to $412 a month. Payne wishes he paid those rates.

Though the 61-year-old Palm Harbor resident is fit enough to run his own medical device company, he pays $1,037 a month for insurance. That's because of a pre-existing condition not uncommon at his age, which he preferred not to disclose. What's more, he has to spend $10,000 in medical costs before his insurance even kicks in.

Here's what officials in Florida, perhaps one of the nation's most reluctant states when it comes to Obamacare, didn't factor into the figures:

Though some people might pay more, they'll be getting better coverage that could mean their overall spending on health care will go down, especially if they are among the estimated 48 percent of individual policyholders who will qualify for tax breaks to help pay for insurance (see box).

And since more people will be in the insurance pool to spread out risks and costs, consumers like Payne with pre-existing conditions will likely pay lower premiums.

"In my mind, it can't get any worse," he said. "It has to get better."

• • •

The new law not only ends insurers' discrimination against people with pre-existing health conditions, but it also requires insurers to sell packages with more benefits and less out-of-pocket costs.

Annual out-of-pocket spending — which includes deductibles and copays — will be capped at $6,350 for individuals and $12,700 for families. And plans must offer 10 so-called essential health benefits, which include maternity coverage, hospitalization, doctor visits and prescription drugs.

That means an eventual goodbye to plans like this one on EhealthInsurance.com: a $10,000-deductible policy with monthly premiums as low as $50 for a healthy, 25-year-old man.

But not everyone — especially people whose good health qualifies them for cheap policies — will be glad to see such plans go.

Holly Hail, a 51-year-old St. Petersburg resident with no pre-existing conditions, now pays $214 a month for insurance with a $7,500 deductible.

"The reason why I have health insurance is that I'm worried about being wheeled into an ER after an accident," said Hail, a health insurance adviser.

Her deductible alone is greater than next year's new limits on out-of-pocket costs. But Hail said she's happy with what she has. She sets aside what she may need for care in a health savings account, gets regular checkups, and takes care of herself. She said she doesn't want any additional coverage — or premium costs.

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"Better coverage for me means I've got to have maternity coverage that I don't need," she said, referring to one of the essentials in the new law.

Carrie McLean, director of customer care at Ehealth, said when the company began notifying customers of pending changes, people called in a panic.

"Typically, people say, 'I shopped for that plan, I liked that plan and I thought if I liked my plan I could keep it,' " she said. "That could be upsetting ... People who already have insurance don't realize they're going to be impacted."

• • •

Whether you buy an individual policy on the government-run online insurance exchange (or marketplace, as it's now called) or through an agent, the same rules will apply once the law is fully implemented. Some carriers are allowing policyholders to renew their plans early to avoid the new requirements until 2015, McLean said.

Most people who are insured get coverage through their employers. Plans offered through employers must also meet those requirements unless they have grandfather status under the law. Certain group employer policies — those with separate medical and prescription drug plans — have an extra year to put some new requirements in place. Most people will have to buy insurance unless they can prove it's unaffordable.

Some states that started their own exchanges have announced what plans will cost. But it's still unclear what exactly the plans — and premiums — in the Florida marketplace, which will be run by the federal government since the state refused the job, will look like. Health and Human Services Secretary Kathleen Sebelius, who was in Tampa last week, said the federal government is still signing contracts with insurers. Rates should be available just before the marketplace goes live on Oct. 1 to sell policies that take effect Jan. 1.

The report on the projected premium increases that Florida insurance regulators produced this month didn't fully account for the fact people will be buying policies very different from what they could get in 2012.

In one comparison, regulators took the single statewide average insurance premium for 2012 — $243 — and compared it with what various insurers said their average premium will be next year under the new rules.

For instance, Cigna's $377 average premium for next year is reported as a 55 percent increase — because it's compared with the statewide average, not with what Cigna customers actually were paying in 2012, noted the Florida Center for Fiscal and Economic Policy.

A spokeswoman for the Florida Office of Insurance Regulation declined to comment further on her agency's report.

Karen Pollitz, a senior fellow at Kaiser Family Foundation, noted that the new insurance rates may be higher than many healthy people are used to paying for individual plans. But overall health costs could be lower if people use their coverage, since there are new limits on out-of-pocket costs.

The point of an insurance pool is that everybody participates, meaning risks and costs are spread among many, she said. This is why people who get insurance through a large employer pay less — and have coverage such as pediatric and maternity care not every individual needs.

"Everybody has stuff they'll never use," she said. "My plan covers prostate cancer."

Jodie Tillman can be reached at jtillman@tampabay.com or (813) 226-3374.