The Investment Scientist

Obamacare: Sh*t Hits Fan

Posted on: November 13, 2013

images-37Today I sat down with a bunch of professionals for our quarterly wealth management meeting. As the talks turned toward the implementation of the Affordable Care Act, I realized the mal-functioning website is the least of its problems.

In our group there is a professional, Andrea, who specializes in helping small to mid-sized businesses procure group health insurance. Andrea said insurance companies are cancelling old plans and giving their customers “upgraded” plans that cost more and provide less benefits.

This hasn’t just been happening in isolated cases, but is rather wide-spread. Why? For one, the ACA has many mandates, such as covering reproductive health. So if a man’s insurance plan does not cover a pap smear, he just lost his plan! OK, I made this up for comedy, but Andrea did mention a 55 year old woman losing her plan because it did not have maternity benefits.

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Another issue with the ACA are the metal boxes that plans have to fall into: the gold, silver and bronze. Take, for example, a gold plan. It should cover 90% of medical expenses; a sliver plan should cover 80%. It turns out many insurance plans cover 92% of medical expenses or 86% of medical expenses, so they are all not ACA compliant.

Lastly is the complexity for small business owners regarding group insurance which used to be one number based on the average age of the group. Now plans have to be age specific down to each individual. It’s an administrative nightmare!

I believe the president needs to keep his word that “If you like your existing plan, you get to keep it.” Either he lied, or there was a massive legislative oversight that allows insurance companies to cancel existing plans. Regardless of what the case is, the buck stops with him. He needs to fix it now, or his signature domestic achievement will collapse under its own weight.

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Michael Zhuang is principal of MZ Capital, a fee-only independent advisory firm based in Washington, DC.


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