By Tom Curry National affairs writer
msnbc.com
updated 11/12/2009 10:08:33 AM ET 2009-11-12T15:08:33

Claim: If the insurance overhaul is enacted, premiums in the private sector will go up by an average of $500 a year.

Any insurance overhaul that becomes law will likely include a requirement that each person buy insurance if he or she isn't already covered. Since the final bill is not yet written, it remains to be seen how stiff the penalties will be for having no insurance and how many people decide to pay the fine rather than buy coverage. The bill is also likely to limit the age rating, the ratio of the insurance premiums charged to older people relative to younger people. The House Democrats' bill would allow insurers to charge older people no more than twice as much as they charge younger people, a change from the 5:1 ratios now in effect in some places. If that became law, it would lead to higher premiums for younger people.

Fact or fiction?
Unclear. New rules "may cause premiums to rise for lower-risk individuals, but to fall for higher risks," said Thomas Buchmueller, professor of risk management and insurance at the University of Michigan business school. Much depends on how effective the penalties are for not being covered and on ways people might find to "game the system." Massachusetts requires residents to buy insurance, but some game the system by purchasing insurance for a few months, using a lot of medical care, and then dropping their coverage and paying the penalty, which is far less than the cost of coverage. More uninsured would lead to higher premiums for the insured. Much also hinges on the size of the subsidies. The House bill subsidizes a family of four making $42,000 a year, for example, so that they'd pay $245 a month for coverage.

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