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October Commentary: Is it the AFFORDABLE Care Act?

It is the last week of October, and we are less than two weeks away from the end of this root canal of a Presidential election. But even before election day finally arrives, millions of Americans will sign up for health insurance during the fourth annual open enrollment of The Patient Protection and Affordable Care Act, otherwise known as Obamacare.


Earlier this week, the Obama Administration released the 2017 rates for the 39 states that participate in the national health insurance exchange on To say these rates were met with resistance would be an understatement of epic proportions. There really is no way to sugarcoat it. On average, the 10 million people who are currently enrolled in ACA on-exchange plans will see a 25% increase on their 2016 premiums. Some states, such as Arizona, Alabama and Oklahoma, are bearing the brunt of the increase, with rates going up somewhere between 67%-145%. Others, like Ohio, Rhode Island and Indiana are actually seeing price decreases between 1-4%.


So why the huge disparity? One significant issue has been the rapid decrease in the number of participating insurance companies on the federal exchanges. In most cases, the states with the highest increases are those that have the largest decreases in participating insurers. Let's take the three states mentioned above as having the highest percentage increase: Arizona, Alabama and Oklahoma. Those three states had an average of six participating insurers in 2015. In 2017, both Alabama and Oklahoma will have only one insurance carrier participating in the exchange, while Arizona will have 2. That is an 80% decrease in participation. Fewer insurers means less competition. It means more risk for the participating insurers because they are insuring more people, and therefore they charge higher premiums to offset that risk. When you couple this with the fact that in many of these states insurers were also undercharging, you have massive increases that leave a very bad taste in everyone's mouth.


While the media has rightly reported on the massive rate increases, there is another piece of the puzzle that must be put on the table if we are going to keep everything in perspective. The vast majority of insured people will NOT be subject to these increases. The 72% of all insured adults who receive their insurance coverage through their employer are not in play here. That is not to say that the cost of their insurance won't rise-- probably will--but not at these epic levels.


The next time a 72-percenter complains about their employer-paid health insurance, I encourage them to read the next paragraph.


Currently, approximately 12.7 million people receive their healthcare from the healthcare marketplace. Of those, nearly 9 million receive subsidy in the form of tax credit to offset their premium costs. The other 3.7 million people, including yours truly, purchase their health insurance through the marketplace, but are not considered "off-exchange" because they do not receive financial relief. It is those 3.7 million people who will be hit with what can only be described as a sucker-punch of insurance premium increase.


Given that, what can you do, as a consumer, to better your insurance situation?


Consider the HSA option. Health savings accounts can be a great way to use pre-tax dollars to offset medical costs. For the year 2017, individuals with an HSA can contribute up to $3,400 ($6,750 for families) which can then be used to pay for qualified medical expenses. Keep in mind that you must be in an HSA-eligible plan in order to contribute to your HSA.  These are plans with higher deductibles and will be marked as HSA-eligible when you search plans. Dollars contributed to your HSA can roll over from year to year and can be used even if you are no longer participating in the HSA-eligible plan. There is no time limit on using these funds. While it doesn't change the fact that you might have a higher deductible, there will be some relief through the HSA tax advantage.


Consider Bronze. As someone who shops for personal health insurance every year, I can tell you that taking the approach of paying for "services-rendered" is not a bad solution if you are looking to keep your premium dollars down. It is important to keep in mind that the difference between plan levels (Bronze, Silver, Gold, Platinum) is not about WHAT is covered, it is about HOW MUCH you share in the cost. In a bronze plan, yes, you will pay more out of pocket. Your deductible will be higher and your co-insurance share will be greater. BUT, your premium will be lower. If you are relatively healthy, with not much in the way of anticipatable medical needs, why not opt for lower fixed cost with the understanding that if there is a medical need, your cost will be higher? Plus, if you have a year of significant medical needs, and you use up your entire deductible and out of pocket maximum, you will end up paying less than if you had a gold or platinum plan.


Pay attention to your medical costs. This one goes for anyone on any insurance plan. The truth is that we all need to understand what we are paying and what the insurance companies are paying for our medical care. You should always know what you are on the hook for and what you are not on the hook for, so you can make a calculated decision on the best plan for you. Read the explanation of benefits that every insurance company provides you. Read the medical bills you receive and make sure they are accurate. This may sound obvious, but you would be surprised how many people just pay bills because they assume their accuracy. Also, don't be afraid to contact your insurance company to discuss what was covered or not covered. Similarly, talk to your medical professionals. If you have a high deductible, explain that to them before you receive services, or even when you receive the bill. They understand the insurance dilemma better than anyone and can help you navigate a difficult landscape.


While it is hard to minimize the positive impact that Obamacare has had on millions of people, there is no question it has some serious flaws as currently written. Many would argue that the subsidy does not go far enough, as the threshold seems unimaginably low in some states, especially in the Northeast and West Coast. Others would argue that the benefits they receive are far less than they received before the law was enacted and that they are paying more for less. And businesses will tell you that because of the increased costs of providing health insurance, they have had no choice but to eliminate coverage options or provide less assistance towards premiums, which creates an unhappy workforce and makes them noncompetitive. Simply said, the  Affordable Care Act is quickly earning the reputation of not being affordable nor providing good healthcare.


It is the opinion of this financial advisor that the lion's share of the responsibility falls directly at the feet of our Congress. The two sides have become so polarized that they refuse to meet in the middle to build upon what works and fix what does not. Without their respective partners across the aisle, Democrats feel forced to champion the law as is, with all of its flaws, and Republicans feel forced to push for total repeal, and in so doing, are giving up all of the positive impact the law has made. Some leaders seem so hell-bent on digging their feet in that you actually begin to wonder if they even have a clue as to how this law impacts, positively and negatively, the very people they represent.


No matter who wins this election, it is something our next President is going to have to tackle. The only two things that we can be sure of is that the law cannot stay exactly as it is today, and it cannot be repealed and sent to the scrap pile. Neither of those things solves the very real problems that we the people are facing. Hopefully, our next President and the next Congress will understand that.




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 Securities offered through American Portfolios Financial Services, Inc. Member FINRA/SIPC (FINRA/SIPC). American Portfolios Financial Services, Inc. and American Portfolios Advisors, Inc. are not affiliated with any other named business entities mentioned.

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