Medical insurance is a big part of every American household. It takes about 5-10% of the income if covered by employer or more around 10-25% for self employed individuals. Self Employed individuals including myself are forced to shop for their medical insurance needs in the open individual market. With no proper regulation, they face lot of hazzles to get coverage for themselves and their family. Without proper medical coverage is a major concern for many individuals.
The hazzle starts with coverage limitation for pre-existing conditions, even rejections in some cases, high premiums, high out of pocket expenses and much more. I myself changed insurers many times in the past 5 years just to keep low deductibles under the budget. With the new National Health Reform Act, we hoped for some relief and looks like some relief is here.
Drawbacks of Current individual insurance market
Let’s first look at some major downsides in getting individual health insurance coverage which might help to appreciate the changes.
An individual/self employed cannot buy coverage in the “group market” like small business or corporate companies. Employers usually cannot be turned down for coverage in the group market and also negotiation power. Instead, the self-employed have to buy coverage in the open individual market which might allow flexibility to choose from different insurers but premium is not bargainable.
Also Insurance companies many times rejects applicants with pre-existing conditions and are not required to cover them at anytime. They even cancel the insurance for many individuals when they get sick very badly. So people with serious health conditions was never able to buy coverage in the individual market. Even if they do, they can only get very expensive coverage in the high risk pool, if they can afford it. On top of that, there will be annual or lifetime benefits limitation.
Treatment for pre-existing conditions can be excluded for up to 18 months for coverage offered to self-employed people in the individual market. Usually it is only 12 months for the coverage sold to small businesses or corporate in the group market.
Changes on the way by New Health Reform Act
That’s correct. Changes are coming on our way and we can only hope them to be good. Below are some of the proposed regulations, most of them are expected to go active by next year.
- Insurance companies would no longer be able to deny coverage to kids with pre-existing conditions.
- Certain annual and all lifetime limits on benefits would be prohibited.
- Insurance companies would no longer be allowed to drop coverage when policy holders get sick.
- Prohibits insurers from requiring policyholders to get prior authorization for emergency services.
- Insurance companies must also spend at least 80 percent of their premium revenue on direct medical care for individual policyholders — or pay rebates, starting next year.
- Insurance companies will not be able reject applicants with pre-existing conditions or set premiums based on a person’s health status.
- Individuals and Self employed people can buy coverage in the Health Insurance Exchange (just like members of Congress), where he/she can choose among competing insurance companies.
As per reports, National health reform act is expected to help around 13.1 million self-employed Americans. At the same time, there are things which still need to considered like Pregnancy coverage. I don’t see any relief for young self employed who want to grow their family. Maternity insurance is another area individual insurance doesn’t cover and hope they do something about it.