More than half of the nation's insurance plans for individuals do not meet the minimum standards of coverage set by the Affordable Care Act, according to a new report by researchers at the University of Chicago and Towers Watson, a risk-management research organization. In contrast, the study found that most group plans did meet the standards of the act.
The study analyzed individual and group insurance data from 2010 for more than 2,000 public and private employers in five states: California, Pennsylvania, Florida, Utah and Michigan. These states make up about 31 percent of enrollment in the U.S. insurance market.
Under the Affordable Care Act, health plans sold through the new state exchanges that will be operational by 2014 must cover at least 60 percent of health costs. The average group plan in 2010 covered 83 percent of costs, but a majority of the individual plans were under 60 percent.
The differences in average annual out-of-pocket expenses were striking: For a family with group coverage, the average out-of-pocket expenses were about $1,765 per year (not including premiums), compared with $4,127 per year for people with individual coverage. A family in the top 1 percent of medical spenders with an individual plan could end up paying more than $27,000 per year in out-of-pocket medical expenses.
"People who buy individual coverage often get low value for plans that do not offer essential benefits, such as maternity care," said lead author Jon Gabel, a senior fellow at the National Opinion Research Center, at the University of Chicago. "This study suggests that by the year 2014 these Americans will be able to buy much better plans that offer more financial protection."
The authors note that the differences between individual and group plans will have significant policy implications going forward. Under the Affordable Care Act, insurers will have to lower deductibles on individual plans to qualify for inclusion in state exchanges.
The study did not analyze the initial cost of new plans to employers or to individuals. The implementation of the state exchanges will be determined after the U.S. Supreme Court delivers its opinion regarding the constitutionality of the Affordable Care Act, due out next month.