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By now, you probably have a pretty good idea about the affordability of the PPACA, a.k.a. Obamacare. You may say that “it isn’t that bad, at least I can have health insurance.” And you’d be right…

Yes, you can have health insurance, if your company does not provide you with one,  and you can afford it. The premium rates and deductible has been stated in “Part 2 and 3…”, let’s look at how provider bills get paid under the PPACA after the yearly deductible has been met. Please keep in mind that the payment processing is not subsidized and as such, provider’s bills for the people above or under the federal poverty level will be processed the same way.

For simplicity, we’ll look at a bill with the round number of $10,000 after the deductible had been met. Please view carefully the part below in the “Member payment” column:

The plan “allowed amount” is basically a contractually agreed upon amount between the health insurance company and the in-network providers, based on procedures or codes. The payment for out of network providers is loosely calculated based on the in-network “allowed amount” by the insurance companies for members as:

(Provider charge – (in-network allowed amount * percentage of plan responsibility)) = Member payment

Depending on the provider charges and the plan allowed amount, the member payment could be much more; for example in the case that the provider is a hospital and their bill is, say $100,000. In this case, member payment would be $10,000-20,000 in-network and $55,000-70,000 out of network.

The Affordable Care Act has a provision for limiting “out of pocket” expenses after the deductible had been met. Generally speaking, the out of pocket expense in most Exchange plans is equal to the deductible amount, after that time, the plan covers 100% of the cost. In another word, once you pass your deductible, you could expect to spend another “deductible”, prior to the insurance company covering 100% of the provider’s bills. Please keep in mind that the out of pocket expense for in and out of network may not be the same and dependent on the insurance company’s policy for the plan in question.

If the payment processing after the deductible has been met reminds you of the indemnity plans of the eighties, you’re not alone. The health insurance companies, in cooperation with the congress, figured out how to merge the HMO and indemnity type of plans into the exchanges provided plans. The problem with this merge is that it pretty much dropped both type of plans’ benefits for the member.

As a reminder, the indemnity plans of the past generally had a 80/20% split of the cost of care and there had been no provider network. Basically the member could get his/her care anywhere, the insurance companies didn’t care; the member pays 20% of the cost and that was the end of it.

The HMO based plan introduced a provider network that required a copayment, but in exchange, no additional payment required for the member. If the member required out of provider network services, the provider’s bill had been processed pretty much the same way as described above. The premium for this type plan was also higher, than the cost of indemnity type plans.

From the perspective of the health insurance companies participating in the healthcare exchanges, this is a great regulation. They can charge the premium rate of the HMO and split the cost with the member, if end when the deductible has been met, and the member still needs the care.

The Patient Protection and Affordable Care Act can be viewed as it did not address the affordability for those, whom are forced by law to  shop on the healthcare exchanges. The yearly cost of just having insurance is too high for both income ranges, the coverage is limited in most cases, and the member payments could amount to another 5-10% of his or her income, depending on the medical status, if and when the health insurance is utilized. Congress missed addressing the healthcare cost spiraling out of control.

The $95.00/month ($1,140/year) penalty for not having insurance is certainly a lot less, than any of the plans, including the catastrophic plans, for people whose income above the federal poverty level.

The catastrophic coverage is only an option for people under the age of 30; however, the lowest costing such plan has a monthly premium of $390.44 ($4,685.28/year) with $12,700 yearly deductible for a couple. That adds up to $17,385.28, prior to the insurance companies covering any of the member’s expenses. It is basically a question of affordability, $17,385.28 vs. $1,140 per year.

Guess what most young couples will choose? Yes, and I don’t blame them…