Cheaper Health Insurance Comes at a Cost for Some

by Nancy Metcalf Health Writer

One of the major gripes critics have about the Affordable Care Act (aka Obamacare) is that it forces people to buy health insurance plans that cover broad categories of required benefits instead of allowing people to save money by picking and choosing just the benefits they want.

The object of their wrath is a key provision of the ACA that says that every health plan sold to individuals must cover 10 essential health benefits— no exceptions allowed.

Here they are:

1. Ambulatory services (think doctor visits and outpatient treatments)

2. Emergency care

3. Hospitalization

4. Maternity and newborn care

5. Mental health and substance abuse treatment

6. Prescription drugs

7. Laboratory services

8. Preventive and wellness care

9. Rehabilitative and “habilitative” (think autism treatment) services

10. Oral and vision care for children.

What nongroup plans covered before the ACA

Before the ACA was enacted it was hard for individuals shopping for health insurance on their own to get their hands on some of those benefits.

A government study done a few years before the ACA took effect found that 62 percent of people with nongroup plans had no maternity coverage; 32 percent lacked coverage for substance abuse; 18 percent had no mental health benefits; and 9 percent had no prescription coverage. And few if any plans covered autism therapy or kids’ oral and vision care.

There’s no doubt allowing health insurance companies to offer plans without some of those benefits would be cheaper for the people who buy them, according to insurance experts.

But people who opted out of certain benefits would be out of luck if they ended up needing them after all. And costs would shoot up for people who know they need the benefits.

Here’s why that would happen

“I use the analogy of cable channels,” says Hans Leida, a principal with Milliman, an international actuarial firm. “You have to buy them in big packages that have a bunch of channels you’re not interested in.

"In an unbundled world, a lot of those channels might not survive because not enough people are interested in them, or they might cost an enormous amount. The same is true when you start unbundling health care services. Except it might not be a channel someone finds entertaining—it might be a service you end up really needing," he says.

If people were allowed to buy certain benefits as a la carte “riders”—mental health, maternity, and prescription coverage are the ones most often mentioned—“only those who are certain they need it would buy it,” explains JoAnn Volk, an insurance expert at the Georgetown University Center on Health Insurance Reform.

In a March 2017 white paper on essential health benefits, Milliman actuaries modeled the effect of making maternity coverage an optional benefit.

As an essential health benefit, maternity care adds somewhere between $8 and $14 to everyone’s average monthly premium. Selling maternity coverage as a rider would mean a plan with maternity benefits would cost 20 percent to 70 percent more than a plan without.

And, the actuaries predict, eventually insurers would stop offering maternity coverage at all, at which point women would be on the hook for the $15,000 or more it costs to have a baby in the United States.

Nancy Metcalf
Meet Our Writer
Nancy Metcalf

Nancy Metcalf is an award-winning independent journalist specializing in health topics. A senior writer and editor for Consumer Reports for more than 25 years, she is a nationally recognized expert on health insurance and health reform.