Obamacare’s Effects on Your Life Insurance Coverage


Obamacare’s Effects on Your Life Insurance Coverage

The requirements of Obamacare may affect your ability to retain life insurance coverage, which is necessary to take care of your family financially after you are gone. For this reason, it is important to prepare for these effects so that you do not leave your loved ones without critical protection.


Burdens on Employers


Although Obamacare is designed to increase the availability of health insurance coverage for working Americans, this legislation may have unintended negative side effects. Most notably, it may place an excessive financial burden on employers. Some companies, particularly small businesses, may find it difficult to continue offering insurance coverage in any form to their employees.


About 9 percent of United States employers responded to a recent survey by stating that they plan to discontinue offering all insurance benefits to their employees by 2016. Another 10 percent of those surveyed stated that they have not yet decided whether to continue offering insurance benefits, including life insurance coverage.


Among the companies surveyed, companies with fewer than 100 employees made up an overwhelming majority of those that planned to discontinue insurance coverage. About 13 percent of these employers will no longer offer life or health insurance benefits by 2016. Conversely, only about 2 percent of large companies, defined as those employing more than 1,000 workers, plan to drop insurance benefits.


Possible Effects of Obamacare


If you have life insurance through your employer, it is important to find out whether your employer plans to discontinue sponsoring your life insurance plan. There are several possible effects this legislation may have on the availability of life insurance coverage:


·         Life insurance coverage through a large corporation may be more secure than through a small business. This is because larger companies typically have the capital to properly manage health and life plans, even with the numerous requirements of Obamacare.

·         Small business employees face the greatest risk of losing their employer sponsored life insurance coverage. As the provisions of Obamacare take effect, small businesses may not be able to shoulder the additional administrative expenses involved with maintaining employee insurance plans.

·         Although Obamacare does not specifically address life insurance, the expense of administering this plan may cause future taxes on employers that continue to offer this coverage to employees. Obamacare life insurance taxes may cause some companies that initially continue to offer group life benefits to discontinue coverage to avoid the burden of additional taxation in the future.

·         Decreased employer participation in group life insurance benefit plans may increase the demand for coverage in the individual life insurance market. Increased demand gives insurance carriers the leverage to increase premium rates and adopt more stringent underwriting criteria. As a result, life insurance might be more expensive and more difficult to obtain in the future.


Shielding Yourself Against Obamacare’s Effects


Of course, the full effect of Obamacare on life insurance coverage will not be understood until the legislation has been in effect for several years; however, it is critical to plan ahead to avoid going without life insurance coverage in the future.


If you work for a small business and your spouse works for a large corporation, it might be advisable to find out if the corporation offers life insurance benefits to spouses. If so, taking advantage of this coverage can help shield you against becoming uninsured if your employer decides to discontinue offering life insurance benefits. Also, because large company group life insurance plans base rates on a larger pool of subscribers, your spouse’s company might be able to provide you with life insurance at a premium rate lower than you are currently paying through your employer.


Individual life insurance coverage can also be an appropriate option. Although you will not have the advantage of group rates, you can typically obtain an affordable term life policy if you are currently in good health.


Getting individual life insurance before your company decides to discontinue insurance benefits can have two cost-saving advantages:


·         Your individual life insurance benefit rates are based on your current age and health. If you wait until your employer drops your coverage, you risk developing health problems in the interim. At the very least, you will be paying rates for a higher age factor. For example, if you are 40 years old, and you wait until your employer discontinues life insurance benefits three years from now, you will have to pay rates for a 43 year old when you purchase individual coverage. Conversely, you can lock in 40 year old rates by purchasing individual coverage now.

·         It might allow you to avoid the Obamacare life insurance effect of higher premium rates based on increased demand. By obtaining coverage early, you have the opportunity to lock in your premiums at lower rates and maintain coverage at a cost that fits your budget.

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