Anna Wilde Mathews and Louise Radnofsky wrote in WSJ on 22 March 2013:
Health insurers are privately warning brokers that premiums
for many individuals and small businesses could increase sharply next year
because of the health-care overhaul law, with the nation's biggest firm
projecting that rates could more than double for some consumers buying their
own plans.
The projections, made in sessions with brokers and agents,
provide some of the most concrete evidence yet of how much insurance companies
might increase prices when major provisions of the law kick in next year—a subject
of rigorous debate.
Health insurers are privately warning brokers that premiums
for many individuals and small businesses could increase sharply next year
because of the health-care overhaul law. Photo: Getty Images.
The role that pharmacies play in the health-care system is
expanding. But that doesn't necessarily mean that consumers are better off.
MarketWatch's Christopher Noble reports. (Photo: Getty Images)
The projected increases are at odds with what the Obama
Administration says consumers should be expecting overall in terms of cost. The
Department of Health and Human Services says that the law will "make
health-care coverage more affordable and accessible," pointing to a 2009
analysis by the Congressional Budget Office that says average individual
premiums, on an apples-to-apples basis, would be lower.
The gulf between the pricing talk from some insurers and the
government projections suggests how complicated the law's effects will be.
Carriers will be filing proposed prices with regulators over the next few
months.
Part of the murkiness stems from the role of government
subsidies. Federal subsidies under the health law will help lower-income
consumers defray costs, but they are generally not included in insurers'
premium projections. Many consumers will be getting more generous plans because
of new requirements in the law. The effects of the law will vary widely, and
insurers and other analysts agree that some consumers and small businesses will
likely see premiums go down.
Starting next year, the law will block insurers from
refusing to sell coverage or setting premiums based on people's health
histories, and will reduce their ability to set rates based on age. That can
raise coverage prices for younger, healthier consumers, while reining them in
for older, sicker ones. The rules can also affect small businesses, which
sometimes pay premiums tied to employees' health status and claims history.
[image] Associated Press
UnitedHealth Group, the nation's largest carrier, and other
health insurers said premiums for some individuals and small businesses could
rise.
The law's 2014 effect on larger companies is likely to be
more limited. Many of the big changes coming next year won't touch them as
directly as individual consumers and small businesses, though some will have to
grapple with the cost of covering more workers or paying a penalty.
The possibility of higher premiums has become the latest
focal point of the political tussle over the health law, which marks its third
anniversary Saturday. Republican lawmakers have held hearings on the issue, and
six GOP members of the House Energy and Commerce committee wrote last week to
more than a dozen insurers asking them to turn over internal analyses on the
law's impact on premiums and costs.
The insurance industry has also been talking publicly about
big potential premium increases in lobbying for tweaks to the law.
The individual market includes about 15 million people, and
around 18% of the roughly 149 million with employer coverage were at small
companies, according to 2011 figures from the Kaiser Family Foundation. The
individual market is expected to grow to around 35 million people by 2016 as a
result of the law.
In a private presentation to brokers late last month,
UnitedHealth Group Inc., the nation's largest carrier, said premiums for some
consumers buying their own plans could go up as much as 116%, and
small-business rates as much as 25% to 50%. The company said the estimates were
driven in part by growing medical costs not directly tied to the law. It also
cited the law's requirements that health status not affect rates and that plans
include certain minimum benefits and limits to out-of-pocket charges, among
other things.
Jeff Alter, who leads UnitedHealth's employer and individual
insurance business, said the numbers represented a "high-end
scenario," not an average. "There are some scenarios in which a
member could see as much as a 116% increase or over," he said, though
others, such as some older consumers, could see decreases. He said the company
dwelled on the possible increases because it was trying to prepare brokers to
speak with clients facing big jumps.
Other carriers have also projected steep rate increases
during private meetings and conversations with brokers. Brokers say they are
being told to prepare the marketplace for small-business and individual rate
increases as carriers get ready to file specific rate proposals and plan
designs with regulators.
Insurers are "not being shy that premiums are going to
increase in 2014," and are urging brokers to "brace our
clients," said John Lacy, vice president of group benefits at Bouchard
Insurance, a brokerage in Clearwater, Fla. His firm has been hearing from
carrier representatives that individual premiums in Florida could go up 35% to
50%, on average, and small-business rates around 30%, though it hopes to find
strategies to blunt the impact.
Aetna Inc., in a presentation last fall to its national
broker advisory council, suggested rates on individual plans not being
grandfathered under the law could go up 55%, on average, and gave a figure of
29% for small business rates. Both numbers included 10 percentage points tied
to medical-cost inflation, not the law. An Aetna spokesman said the numbers are
"still generally in line with what we've been estimating," and
represented the average impact in a typical state.
An official with Blue Cross & Blue Shield of North
Carolina told a gathering of brokers last week that individual premiums could
go up by as much as 40% to 50%, according to brokers who were present. A
spokeswoman for the insurer said "we don't have final numbers" yet on
premiums.
There has long been debate, even among insurance experts,
over how the law will affect premiums. Because the effect is likely to vary,
different measurements can arrive at different conclusions. The CBO analysis
cited by the administration determined that average premiums for consumers who
buy their own coverage would be 14% to 20% lower because of the law—if the law
didn't change the types of plans they purchased.
But the CBO also suggested the law would lead to consumers
buying more expensive plans, largely because it requires coverage to include
certain benefits and limit charges such as deductibles. When this effect was
taken into account, the average premiums would go up 10% to 13%, the agency
said, though subsidies would ease the bite for most people. The agency also
said small-business policies were likely to cost within a few percentage points
of the amount they would have without the law.
Health and Human Services officials say competition among
insurers, as well as provisions to limit their financial risk from attracting
high-cost consumers, will exert downward pressure on premiums, and point to the
tax subsidies that will limit many consumers' costs.
Subsidies will be available on a sliding scale for people with
incomes of up to four times the federal poverty level—currently $45,960 for a
single person and $94,200 a year for a family of four. More than half of the 35
million people expected to be in the individual market by 2016 are likely to
qualify for credits. People whose incomes are around the poverty level could
see almost all of the cost of their insurance subsidized, while people at the
upper end will get only a small discount toward their premiums.
Write to Anna Wilde Mathews at anna.mathews@wsj.com and
Louise Radnofsky at louise.radnofsky@wsj.com
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