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Front Page - Friday, October 30, 2020

Personal Finance: How losing ‘Obamacare’ could cost nearly everyone

If the Supreme Court throws out the Affordable Care Act, your finances and your future could pay the price.

Retiring early or starting a business might become too hazardous if your access to health insurance isn’t guaranteed. You might have to wait a year before preexisting conditions are covered by an employer’s plan. Young adults could be kicked off their parents’ policies.

Millions of people who buy insurance through the ACA marketplaces or who now qualify for Medicaid could lose their coverage, as well.

Even if you were able to keep your health insurance, you could face caps on your coverage that expose you to enormous medical bills. Preventive care and birth control could cost you more. Medicare beneficiaries could face higher premiums, deductibles and copays. Insurers could cancel your policy retroactively for even minor mistakes on your application.

In the decade since the ACA became law, many Americans have become so accustomed to the protections and savings afforded by the landmark legislation that they may not realize how much could change if “Obamacare” is struck down. Its effects on health care are so pervasive that nearly every American could be affected, according to the Kaiser Family Foundation, which tracks health care issues.

Preexisting conditions

The Trump administration and a group of Republican attorneys general have asked that the entire law be thrown out. The Supreme Court is scheduled to hear oral arguments Nov. 10.

Before the ACA, insurers routinely used preexisting health conditions as a reason to deny coverage or charge people more. Preexisting conditions included serious ailments such as cancer or heart disease as well as more common conditions such as high cholesterol, high blood pressure, asthma, diabetes and obesity, and temporary conditions including pregnancy.

Insurers denied about one in five applications for individual policies because of preexisting conditions, and some employer-provided group policies required people to wait up to a year before their preexisting conditions were covered.

Back then, many people who had health issues – or whose family members did – avoided changing jobs, starting businesses or retiring early because of the risk they couldn’t find affordable health insurance.

President Trump signed an executive order in September announcing “a steadfast commitment to always protecting individuals with preexisting conditions,” but the order alone can’t force insurers to offer coverage if the ACA is struck down.

And America is a land of preexisting conditions. Half of adults younger than 65, or as many as 133 million people, had health issues that could cause them to be denied coverage or charged exorbitant premiums, according to a 2017 government analysis.

‘Use it and lose it’ coverage

Health insurance is meant to help people pay their medical expenses and avoid potentially catastrophic bills. Before “Obamacare,” however, using your insurance could cause you to lose it.

If someone with an individual insurance policy got sick, the insurer could scour the person’s application looking for errors. Even minor mistakes could cause the company to revoke the policy, a practice called rescission. Under the ACA, rescissions are allowed only if there’s fraud or a material misrepresentation of facts.

Policies also routinely had caps that limited how much insurers had to pay out over someone’s lifetime. People who were sick enough could hit those caps and be on the hook for 100% of their medical costs afterward.

Other potential side effects

Millions could become uninsured if the ACA exchanges are shut down, expanded Medicaid coverage is rescinded and insurers are no longer required to cover children under 26 on their parents’ plans. Some employers may continue dependent coverage, since young people in general tend to use less health care. But young people in poor health or with preexisting conditions could be shut out.

Without the ACA, insurers could once again charge copayments or coinsurance for preventive care, including screenings, immunizations, annual checkups and birth control. Medicare beneficiaries could once again have to pay for certain services, including screenings for breast cancer, colorectal cancer, cardiovascular disease and diabetes.

The law also closed the infamous “doughnut hole” in Medicare’s prescription drug coverage that left many older people paying thousands of dollars out of pocket for their medication.

Ending “Obamacare” could increase Medicare beneficiaries’ costs in other ways. The ACA reduced payments to medical providers and private insurers. Reversing that could lead to higher deductibles and copays for Part A, which covers hospital visits, and higher premiums and deductibles for Part B, which covers doctor visits and other outpatient care.

On the other hand, fewer high-income beneficiaries would face premium surcharges if “Obamacare” went away. Private Medicare Advantage plans could reduce costs and improve coverage. A 0.9 percentage point increase in the payroll tax on higher-income workers also would be repealed.

Then again, increased Medicare spending and reduced revenues will deplete the system’s trust fund faster. The current insolvency date, with ACA in place, is 2028; after that point, Medicare’s revenues won’t be enough to cover all of its promised benefits.

You might not have thought America’s health care system could get any more dysfunctional. If “Obamacare” goes away, prepare to be unpleasantly surprised.

Liz Weston is a columnist at NerdWallet, a certified financial planner and author of “Your Credit Score.” Email: lweston@nerdwallet.com. Twitter: @lizweston.