Setting the record straight on ACA

The following is a bulletin distributed by the Maine Insurance Agents Association that corrects erroneous information being distributed by agencies of the U.S. Government and some consumer groups regarding the Affordable Care Act. We hope you find this information of use. Please contact us for any clarification about your obligations under the ACA.

Information is being put out, even some by government agencies, on some of the benefits of the Affordable Care Act. We have had some members express concern about the accuracy of this information and this bulletin is to set the record straight on a few things.

• One of the claims is that the Affordable Care Act prevents insurance companies from cancelling your coverage when you get sick by finding a mistake on your paperwork. In reality, guaranteed renewal has been the law in Maine since 1993 and has been Federal law since 1996. Insurance carriers could not cancel your coverage when you became sick. There was still a limited ability to cancel coverage for fraud. Claims that the Affordable Care Act prevents insurance companies from cancelling your insurance because you became sick are not true as that was already the law. It also should be noted that before it was the law, overwhelming majority of policies sold were guaranteed renewable. Prior to it being the law, insurance companies offered people the choice of contracts that were guaranteed renewable and the contracts that were not guaranteed renewable. Most people chose the contracts that were guaranteed renewable. The false claim of legislation stopping insurance companies from canceling policies because you become sick has been used a lot over the years. So-called consumer groups have claimed that legislation would stop this when that is not what the legislation actually did. They have also made claims that legislation they oppose would allow insurers to drop people when they become sick when in fact the legislation did not do that.
• There are claims that the ACA is limiting insurance companies’ overhead, marketing and CEO salaries. The Affordable Care Act contains no limit on CEO salaries.It does require that insurance companies in the small group and individual markets may only spend 20% of premium on administration and profits. Even before the law passed, the three major carriers in Maine were already meeting the requirements of the ACA when it came to administrative expenses and profits. We did have two small carriers that were not meeting these requirements. In some states, carriers have cut agent compensation rather than CEO pay to comply with the regulation.
• There are claims that insurance companies could raise your premiums by double digits without justification.
• That is not true at least for the State of Maine for the individual and small group market. Insurance companies’ rates were reviewed by the Bureau of Insurance and they had to be reasonable. The ACA does impose a 10% limit without having to have rate review, but Maine already had rate review procedures in place. Prior to the ACA most states followed a version of the NAIC (National Association of Insurance Commissioners) 1991 model law on rate review which has a requirement on rates being reasonable. In most states the ACA requirements are stricter than the old state requirements. In Maine the ACA is actually more lenient than our old rate review requirements. However, claims that carriers did not have to justify rates are an exaggeration.
• There is a statement that says small businesses paid an average of 18% more for health insurance than larger companies. To evaluate this statement, we would have to know how they are defining small business. While we don’t have verification of that figure, it should be noted that in 2014, businesses with fewer than 50 employees will still pay more than businesses with more than 50 employees and in 2016, businesses with fewer than 100 employees will still pay more than businesses with more than 100 employees. However, within the so-called small group markets, the ACA is doing away with group size rating. In general, this will cause rates to go up for businesses of more than 5 employees in 2014. However, businesses with fewer than 5 employees may actually see some benefit from this change.
• In 2016, businesses between 51 and 100 employees will see significant rate increases due to this change while some smaller businesses may see some benefit. There is an actuarial relationship between the size of a business and the likelihood of its employees having claims.
• It should be noted that materials being distributed are omitting the massive rate increases that will occur on January 1 in Maine’s individual market as a result of the ACA. Maine’s small group market will not be as impacted as some other states by the ACA as we were one of the states that was already stricter than the ACA for the small group market. Materials are also omitting the $5.25 per person monthly assessment the ACA imposes on all medical insurance medical polices in January