The Affordable Care Act was supposed to make health insurance more affordable however,  recent market developments as well as projected rate increases for coming renewals present challenges to using ACA policies as a means to mitigate damages during settlement negotiation.

Claims and Litigation Management Suggested Use of ACA to Mitigate Damages in Your Personal Injury Case at Mediation

“Even before trial, the availability of insurance through the ACA may be more effectively raised in settlement discussions. Defendants should prepare multiple cost scenarios, including the annuity cost of the plaintiff’s life care plan, the annuity cost of the plaintiff’s life care plan with insurance, the annuity cost of the defendant’s life care plan, the annuity cost of the defendant’s life care plan with insurance, and the annuity cost of the plaintiff’s life care plan utilizing the proper paid rates for the medical goods and services identified in the life care plan. Additional savings can be realized on these annuitized cost projections by utilizing medical underwriting. The structured settlement consultant will ascertain rated ages from the life
insurance carriers. From these analyses, you can then work with your defense team and annuity broker to develop settlement options. The guaranteed income tax free annuities that are used to fund the structured settlements add a protective layer to the plaintiff knowing that they cannot
outlive their settlement. Those options can include utilizing special needs trusts and Medicare Set Asides as further vehicles to provide for a plaintiff’s future needs at more realistic values. In the end, the goal is to demonstrate to plaintiff, utilizing all available insurance and public benefit
options, how their medical care can be maximized using the amounts being offered in settlement”  [ Source:  CLM 2016 Orlando Florida]

The CLM piece argues that ACA is here to stay having survived multiple high court challenges and the longevity of insurers.

Impact of ACA Policy Rate Increases on Use in Settlements

Settlement offers which trade the cost of future medical care for a structured settlement that pays for an ACA compliant medical insurance policy do not completely solve the problem for the following reasons:

  1. Uncertainty of continued insurer participation in the marketplace. Several major health insurers are leaving exchanges. These include big names such as AETNA United Healthcare and Humana.
  2. Uncertainty of cost of premiums. Without premium rate stability it is impossible to accurately fund medical insurance premiums with a structure.  One will often come up short.  If you have a structured settlement that pays $600 /month with a 3% COLA and then premiums go up by 10% where does that leave you? Then run that deficit out 10 years or longer.  The Milwaukee Journal Sentinel reported August 21 2016 that proposed increases could range from 5.44% to 37.88% statewide, according to filings with the federal government. In Milwaukee County, the smallest proposed increase is 9.06%. Some will be eligible for subsidies, but those ineligible for the subsidies are facing increases of 20% or more!

    Subsidies, in the form of credits, are available to people with incomes up to $47,520 for one person and $97,200 for a family of four. The subsidies scale back for those with incomes close to the thresholds.

Why are premiums on ACA policies rising so much?

The market is smaller than projected. The people who have bought health plans overall are sicker than predicted. And health insurers have incurred larger losses than anticipated. Health care costs continue to rise.

by John Darer® CLU ChFC MSSC RSP CLTC

 

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