New Report: Health Care Law Saves Money for Consumers

By Kathleen Sebelius, Secretary of Health and Human Services
Posted May 17, 2012

Today, 11 million Americans buy health insurance on their own, without the help of an employer, Medicare or Medicaid. Too often, these people pay more money but get fewer benefits than people who have insurance through their employer. What’s more, people in the individual market have higher out-of-pocket costs, including larger deductibles and copays, and a lower likelihood of having prescription drug coverage.

And yet, these individuals are the ones who have been lucky enough not to have been turned away because insurance companies have denied them coverage because of health status or a pre-existing condition. The new health care law has already prohibited discriminating against children because of a pre-existing condition and prohibits the practice with respect to all Americans beginning in 2014.

A new study released today shows that the Affordable Care Act will help people in the individual health insurance market even more. In 2014, individual health insurance is likely to be more generous and more similar to employer-based coverage. And this means Americans will save money. The study compared how much people in the individual market would have saved in out-of-pocket spending alone, had the Affordable Care Act already been implemented.

It found that if adults in the individual market during 2001-08 had benefits similar to those provided under the Affordable Care Act, they would have seen:

  • An average annual savings of $280 in annual out-of-pocket spending for medical care and drugs,
  • Average out-of-pocket savings of $589 for those 55-64 and $535 for those 26-64 with low incomes, respectively, and
  • Near elimination of out-of-pocket expenses over $6,000 for all adults and a reduced likelihood of those expenses over $4,000.

This study highlights just one way the Affordable Care Act will save Americans money, and ensure they get high-quality health care.

How will this happen? Under the Affordable Care Act, there will be a new marketplace—known as Affordable Insurance Exchanges—for individuals to buy health insurance. Exchanges allow consumers to easily compare and purchase affordable, high quality health insurance and require insurance plans to compete on a level playing field. That kind of competition drives costs down for consumers. Additionally, eligible Americans purchasing coverage through Exchanges will have essential health benefits, an annual out-of-pocket limit on coverage, and access to premium tax credits – a benefit not taken into account under this study.

The Affordable Care Act makes other important changes to make the health insurance market work better for Americans. Changes include:

  • Getting rid of lifetime limits and phasing out annual dollar limits on most benefits,
  • Setting a minimum medical loss ratio or 80/20 rule for insurers, generally requiring rebates if less than 80 percent of premiums are spent on health care and quality, and
  • Lowering out-of-pocket spending limits even further for low-income Americans.

For other ways the Affordable Care Act benefits Americans, visit this page.

The article, “Individual Insurance Benefits to be Available under Health Reform Would Have Cut Out-Of-Pocket Spending in 2001 - 08” is available at: http://content.healthaffairs.org/content/early/2012/05/11/hlthaff.2011.1206