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Here’s an email I received shortly after the Supreme Court upheld the Affordable Care Act (ACA). You’ve probably seen something similar online or TV, or maybe even wondered about it yourself…
Why should I now not simply cancel my health insurance, and then purchase it when I need it since I can’t be denied? The penalty is so paltry that I save money by doing so, don’t I?
It’s a good question. Here’s my response…
I see this possibility mentioned in the media often, Ray. But I don’t understand it.
Let’s consider the provision of health care reform you’re describing – the one that forces insurance companies to take everyone, including those with pre-existing conditions.
First, that doesn’t begin until 2014. Between now and then, the government is likely to create rules to nix that idea, or at least make the choice tougher. They could simply adopt strict open-enrollment periods. For example, they could say that if you don’t sign up for insurance between Oct. 1 and Oct. 31, you’ll have to wait a year – even two – until the next open enrollment. That would radically increase your risk of waiting.
Insurance companies could also presumably have a waiting period. In other words, just because you’re guaranteed coverage doesn’t mean you’re guaranteed coverage within an hour. So if you go to the emergency room for a broken leg, will you sit there in agony, applying for insurance and waiting as long as it takes for your newly purchased insurance to kick in?
Even if there’s no waiting period, what if you’re in a car accident that puts you in a coma? Or have a heart attack while sitting at your desk that renders you unconscious? You’ll be strapped to a stretcher, unable to apply for insurance.
In other words, forget the paltry penalty. What you’re really risking by not having insurance is your entire net worth.
So while you might be able to get away with paying a penalty and waiting until you need insurance to buy it, I doubt that will be an attractive option.
My advice is instead to focus on other aspects of the new law that will begin in 2014, like the state insurance marketplaces that will increase competition and therefore potentially reduce prices. Once these marketplaces are established, you might find the cost of insurance more palatable – and the risk of not having it outweighing the cost.
Ray writes back
After I sent that email to Ray, he wrote back…
Thanks, Stacy. That’s helpful. I’ve seen our health care increase by 53 percent (and that was with being a good health risk) over the past 3½ years, so at this point I’ve seen no reason to smile about Obamacare.
And so I replied…
Actually, Ray, I’m in the same boat. My insurance has gone up about the same amount. And while additional coverages, like free preventive care and allowing kids under 26 to remain on their parent’s policies, do cost more, my insurance has been rising at a ridiculous rate since long before the Affordable Care Act. Also keep in mind that when the pool of insureds expands in 2014 thanks to the addition of millions of people, those costs will moderate. Or at least that’s the idea.
On the other side of the coin, here’s a positive from Obamacare that’s already in place: Insurance companies are now required to spend 80 to 85 percent of the money they take in on providing health care to their customers, rather than profits for their shareholders. If they don’t, they have to send rebates to policyholders. One estimate says they’ll be sending out $1.3 billion in rebates this year alone. That sure beats insurance company executives pocketing millions of dollars while they raise my rates. Check out this story: Insurance Outrage: Hike Prices, Pay CEO $100,000,000.
By saying something positive about Obamacare, I’m sure many will think I’m some bleeding-heart liberal who loves big government and hates individual freedoms. Not true. I hate big government, hate paying taxes to keep it alive, and hate any form of government telling me what I can and can’t do.
I do, however, support health care reform. But the reasons are far removed from Washington, D.C. To me this has never been a political issue. I’m a consumer advocate, and health care in this country is a pressing consumer problem. I think we’d all be better off if we turned off the cable news and stopped with the heated rhetoric. This isn’t about Obama or Romney – it’s about you and me.
Consider a few stories I’ve done over the last 20 years:
- An honest, hard-working woman who got cancer, lost her job, then proceeded to lose everything she’d worked her entire life for. (This isn’t rare: According to some estimates, nearly half of our nation’s bankruptcies are from medical bills.)
- Another woman who was between jobs, went to the ER with what she thought was a ruptured appendix (it wasn’t), and left a few tests and a few hours later with a $15,000 bill she couldn’t pay. Her bill would have been $5,000 for an insurance company or $4,000 for Medicare. Why did she get charged $15,000 for a bill for services that could have cost $4,000? Because, according to the hospital’s CFO, so many uninsured patients don’t pay their bills, the hospital has to charge exponentially more to those who can.
- A guy who was laid off, had a heart attack, had surgery, and ended up with a $120,000 bill. When he couldn’t pay it, the hospital sued him and got a judgment on his mobile home. Had Medicare been paying his bill, it would have been less than $50,000.
You don’t have to be a reporter to see the ill effects of our current system – just talk to people around you. I personally know people who would love to be self-employed but have to continue working in a job they hate because they can’t otherwise afford to keep their family safe. I have friends who are self-employed, can’t get coverage at all because of a pre-existing condition, and live in constant fear of getting sick.
This is not the way life is supposed to be, but it’s the way it’s been in the United States for many years now. It isn’t fair, it’s not necessary, and it doesn’t occur in virtually any other First World country on the planet.
Is Obamacare the best and most cost-effective solution for problems like these? I haven’t the slightest idea, and I’m completely open to any form of debate from anyone from any political party about other potential solutions. But I’ve seen with my own eyes what hasn’t worked: the way it was before.
That’s my take. What’s yours? Do you think the Affordable Care Act is an attack on American freedoms, or a step in the right direction? I’d really like to know. Leave your views below, or on our Facebook page.
Got more money questions? Browse lots more Ask Stacy answers here.