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Obamacare not so ‘Affordable,’ study finds

By   /   March 27, 2013  /   20 Comments

By M.D. Kittle | Wisconsin Reporter

MADISON – Here are some lists you don’t want to finish first on:

  • Worst human being
  • Guy with most head lice
  • The naughty list (well maybe you do, you kinky devil, you)
  • Charlie Sheen’s ‘Hey, What’s in This Punch?’ party
  • The Society of Actuaries list of top five states facing the steepest health care cost hikes under the Patient Protection and Affordable Care Act

Wisconsin comes close to topping the latter list.

The Badger State checks in at No. 2 on the Society’s ranking of states expected to be most impacted by underlying claim costs under the ACA, derisively referred to by critics as Obamacare.

Wisconsin claims cost increases are predicted to climb as high as 80 percent by 2017, second only to Ohio, which could see its insurance costs climb by 80.9 percent, according to the Actuaries.

The U.S. Department of Health and Human Services stood by its standard statement, in the wake of yet another report pointing to cost-structure problems with President Obama’s cornerstone health initiative.

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A new study by the Society of Actuaries predicts health care cost will rise 32 percent nationally, 80 percent in Wisconsin, due to influences of the individual health care market under the Affordable Care Act.

“The health care law will bring down costs and save money for your people and families. It’s misleading to look at only some of the provisions of the law because, taken together, the law will reduce costs,” said department spokesman Fabien Levy in an email to Wisconsin Reporter.

True. The health care law will bring down costs – in some states.  New York is expected to see cost declines of nearly 14 percent, according to the Society of Actuaries. Massachusetts insurance costs would decline by 12.8 percent, and Vermont, 12.5 percent.

But overall, the report predicts expected changes in member composition of the individual health care market could drive up underlying claims costs by an average of 32 percent nationally by 2017. The Society predicts as many as 43 states could see double-digit percentage claims cost increase.

Those are alarming projections with less than a year to go before the major provisions of ACA take effect.

“The projections in this study suggest that when the dust settles by 2017, we can expect mixed results on the reform bill’s goals of expanding coverage and reducing costs,” says Kristi Bohn, FSA, consulting health staff fellow at the Society of Actuaries.

There’s no doubt the act will significantly reduce the number of uninsured Americans, with the size of the individual market expected to double, driven in part by the eligible people who will fall 200 percent below the federal poverty line, according to the Actuaries.

“This group of people are considered to be ‘good risks’ and are generally expected to bring down average costs. But other changes in composition of the individual market will more than offset these lower costs, and in fact, will drive average costs up,” Bohn said.

The study found a significant number of people now insured through state-sponsored high-risk pools or through the temporary Pre-Existing Condition Insurance Plan will move into the individual market, taking their higher insurance costs with them. The study also predicts an influx of individuals moving from employer-offered plans to the individual market.

“According to the research, even small shifts from the employer-provided market will have a significant effect on costs in the much smaller individual market,” the Society’s report states.

‘Better benefit’

The Society’s research and its model have been attacked by ACA supporters. HHS points to an Associated Press piece, noting, “Another caveat: The Society of Actuaries contract Optum, a subsidiary of UnitedHealth Group, to do the number-crunching that drives the report. United also owns the nations’ largest health insurance company.”

ACA advocates also say the report omits some key expectations that will help drive down costs, such as increased competition among insurers, improved health care delivery and tax credits. Yep, subsidies. Those credits, of course, don’t just fall out of the sky. They are borne by taxpayers.

Health and Human Services Secretary Kathleen Sebelius acknowledged the health insurance act will raise costs, but that those increases would be mitigated by taxpayer-funded subsidies.

“These folks will be moving into a really fully-insured product for the first time, and so there may be a higher cost associated with getting into that market,” she told the Wall Street Journal. “But we feel pretty strongly that with subsidies available to a lot of that population that they are really going to see much better benefit for the money that they’re spending.”

A tale of two states

Perhaps Wisconsin and Ohio will have a different point of view. The Badger and Buckeye states are national leaders in low-cost insurance, driven by market competition and flexibility. ACA critics in those states are expressing concern about what they see as the redistributive effects of the health care law.

In essence, states with lower individual insurance costs are penalized to the benefit of higher-cost states – like New York, Massachusetts and New Jersey. The Society of Actuaries notes as much.

“In simplest terms, the states that will see large increases generally have low current individual costs and those showing decreases have high current individual costs, with all states moving closer together but at a higher level overall,” Bohn said.

Ohio Lt. Gov. Mary Taylor, in an interview with Wisconsin Reporter Wednesday, said she sees a lot of similarities in the Ohio and Wisconsin insurance market, each, she fears, destined for a negative makeover under the ACA.

“That is really one of our concerns, that we are going to see this one-size fits all approach, yet our states are different (from other states). We have unique needs,” Taylor said.

Wisconsin’s insurance risk pool currently covers about 24,000 high-risk individuals, some with significant health issues, including organ transplant patients, according to J.P Wieske, public information officer and legislative liaison for the Wisconsin Office of the Commissioner of Insurance. Those individuals go into the federal pool, presumably beginning on Jan. 1, 2014, driving up costs in Wisconsin’s individual insurance market.

“We’ve had a good way to insure people with high-risk health issues,” Wieske said. “We’ve got a market that works.”

Wisconsin Gov. Scott Walker, bucking the trend of Republican governors who have accepted federal Medicaid payment increases in the billions of dollars, has turned down the money and turned over responsibility for the creation of health care exchanges to the federal government.

Walker spokesman Cullen Werwie said the report reinforces what the governor has been saying all along, that “the Affordable Care Act will cost people more money and it is bad for Wisconsin’s economy.”

“These are some of the many reasons Wisconsin is not running a state exchange. As an alternative, Governor Walker’s budget includes a plan to increase transparency to drive down health care costs,” Werwie wrote in an email to Wisconsin Reporter.

Trend building?

ACA supporters assert, rightly, the Society of Actuaries study measures more of the worst-case scenarios and fails to take into account the possibilities that implementation of the health care law could go exactly as planned.

ACA critics counter with a question: When was the last time you can remember any government program coming in on plan and under budget?

The rosier federal estimates still worry Taylor.

“If everything goes as planned, premiums will go up,” the lieutenant governor said.

While ACA proponents dispute the latest figures, it’s becoming increasingly difficult to dismiss a growing body of studies projecting increases – in many cases significant – in the individual market.

A report commissioned in 2011 by the Ohio Department of Insurance projects individual premiums could rise by as much as 55 percent to 85 percent in 2014, not including medical trend, typically running at about 7 percent. Those numbers are on par with the Actuaries study.

The Wisconsin Office of the Commissioner of Insurance commissioned a report in 2011 that projected insurance rate increases of 31 percent for nearly 60 percent of the individual market, at least 20 percentage points lower than the Actuaries’ prediction.

Another study from global actuary firm Oliver Wyman finds “young, single adults aged 21 to 29,” with annual income roughly of $25,000, “can expect to see higher premiums” under the ACA.

And a survey by the conservative American Action Forum found that if the health care law’s rules were in effect today, the premium for a basic policy of a 27-year-old nonsmoker on the individual market would be nearly 190 percent higher.

The numbers move from projections to practice in the coming weeks, at least in Wisconsin, when the first rate cases are filed.

In the coming months, states will have a better idea of where they fall on the health insurance cost ranking.

Ohio’s lieutenant governor said she’d be very glad if her state could leave the Society of Actuaries’ top five list.

“I can think of 10 things off the top of my head I’d prefer to be No. 1 at than this,” she said.

Contact Kittle at mkittle@wisconsinreporter.com

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M.D. Kittle

  • OhNoWeCan”l

    Nothing to see here, move on! All Democrats of America

  • Jack Lohman

    ObamaCare is as useless as RomneyCare, but don’t tell the R’s that. If the Dems were smart they’d repeal it in favor of single-payer Medicare-for-all. Not the vouchers the R’s want, but they aren’t very smart either. Medicare-for-all would be the best jobs bill ever, cover 100% of Americans, and save our country $400 billion yearly. But we have gigantic special interests (insurers) that wouldn’t like that a bit, and they help fund the elections for the corrupt politicians that want their bribes. Even those of the R’s that don’t know any better.

  • Jane Kelley

    Jack Lohman could not have said it better!

  • SWohio

    ‘derisively referred to by critics as Obamacare’ and also by Obama, for those who fail to see the anti-conservative bias from the writer.

    There are many clips of Obama referring to his monstrosity as ‘Obamacare’. I guess the writer doesn’t know much about the subject after all.

  • Curtis Henning

    Let me state the obvious. With so much more of our money going to healthcare, there will be little left over to buy things. In a capitalist-driven society, this will be an economic disaster of epic proportions – and no way out! For instance, when gas prices go way up for an extended time, the economy tanks. People are spending their extra money on gas, not other things. As a result, inventories of manufacturers go up, and profits go way down triggering massive layoffs, greatly adding to the economic distress! But so far the prices of gasoline have always come down again, and we all breathe a sigh of relief, and we have more money in our pockets to spend, and the economy picks up. But this upward spiral in healthcare costs is permanent! It is skyrocketing and there is no possible scenario for it to come down again, except, maybe, for the entire economic system to come crashing down – Great Depresson style – where no one gets anything from the government for an extended period of time! With our incalculable national debt already past the point of no return we are getting much closer to the edge! What an unbelievable mess!

  • anthony

    What the article seems to gloss over is that previously uncovered Americans will now be covered. Yes having everybody on the books will cost more money. It’s morally responsible to take care of all your citizens health needs if said society can. Or I could just wait until author of article and naysayers come down with a life debilitating disease.

  • Jack Lohman

    Yes, it is that way because we have corrupt politicians, and instead of correcting the corruption (with public funding of campaigns), the Lefties and Righties spin their wheels on the little fires.

  • mattinnov

    Weren’t health care premiums for private insurers set to more than double in WI over ther next 5 years anyways? Over 35% of the state is considered medically obese. Couple that with more restrictions to qualifying for Badgercare and there you go. right now individual costs are being kept low because of restrictions on profits and administrative costs that aren’t allowed to rise above 20%.

  • http://www.facebook.com/evan.wynn.58 Evan Wynn

    Jack,

    Question: If we had single payer what would happen to the nearly 470,000 people employed in the health insurance industry with an average salary of $61,000?

    Would they all go to work for the federal government? If so, how much would it cost taxpayers to pay their salaries & benefits plus now pay for the health care of everyone?

    Will medical personnel (Dr.s, nurses, etc) become federal workers? Will hospitals and clinics be taken over by the federal government? Medicare only re-imburses about 30% of the cost of treatment. The rest of the costs are shifted to private health insurance. So with 100% of the population on medicare for all, either costs to the taxpayer would have to go up to cover 100% of costs, or health care workers could take a 70% pay cut? What about the costs for maintenance of facilities, purchasing of new medical equipment? With only a 30% re-imbursement rate, would the federal government have to subsidize or take over the private industry that provides hospitals with products and/or services? (If you want to see how the federal government runs health care – visit a VA Clinic or Hospital and ask the veterans what they think.)

    Single payer sounds so simple and easy but there are a lot more issues that come with it.

  • Ryan

    And Guess what, that 20% cap is from Obamacare.

  • Jack Lohman

    First of all, Evan, you sound like you are in the insurance business. But forgetting about that, the 470,000 insurance personnel could easily find new jobs in the healthcare industry because of the number of patients added. And no, they wouldn’t work for the government: Medicare is 95% private. And your argument that Medicare pays 30% of costs is absolutely BS. I was in health care for 40 years and billed Medicare, and they were almost always about 10% over costs. And 10% profit, incidentally, was not all that bad, especially when 100% of the billings are collected. And single payer is operational in virtually all other advanced nations, with BETTER outcomes than the US.

  • http://www.facebook.com/profile.php?id=100003526384930 Chet Field

    Except in separate articles there have been reports of how some people will NOT be covered. Despite the supposed purpose of Obamacare.

  • http://www.facebook.com/evan.wynn.58 Evan Wynn

    Medicare is 95% private? Medicare is run by the Centers
    for Medicare and Medicaid which is part of the federal agency, Department of Health and Human Services. While Medicare may contract out specific services to private companies, the program is 100% federal government and paid partially by payroll taxes, co-pays/shares, and partially from general revenues (taxes).

    The distinction between a payment schedule (Medicare Reimbursement) and a fee schedule (What a health care facility or provider charges for their services) is what creates the problem of reimbursement: a fee is what physicians establish as the fair price for the services they provide; a payment is what Medicare approves as the reimbursement level for the service.

    Since 1984, hospitals have been reimbursed for care provided to Medicare patients under the Prospective Payment System (PPS). Under this system, hospitals receive a fixed payment for each patient that is determined by the patient’s diagnosis-related group (DRG) at the time of admission; thus, REIMBURSEMENT IS UNAFFECTED BY THE HOSPITAL’S ACTUAL EXPENDITURES ON THE PATIENT. (http://www.nber.org/bah/fall03/w9972.html)
    And if Medicare was providing a 10% profit over costs, then why do so few providers take medicare patients? You would think with a 10% profit on every medicare patient, every health care facility & provider would be begging for more medicare patients…

  • Jack Lohman

    100% of Medicare patients see (the SAME) private doctors and go to private hospitals. I’ve been on Medicare for ten years and see the same doctor I’ve seen for 20 years. I have NEVER been refused a test. IF he were losing money on me he would not call me yearly to remind me that it’s time for my checkup. And I saw the same doctor private patients saw.

    While in business I provided a mobile echocardiogram service for $300 per test. The doctor was reimbursed by Medicare $400, but charged private insurers $1800 for the same test. When a doctor builds his practice to over 90%, some (SOME!) will quit seeing Medicare patients to concentrate on the privates. But it is because of the $1800, NOT that they lose money on Medicare.

    PS. If I have to tell you this I take it back. You can’t be in the business. Though since you didn’t deny it you may still be, but just be uninformed.

    PPS: Why is our health care 17.5% of GDP and Canada’s is 10%, yet they provide to 100% of their patients? And have better outcomes than we do?

  • OldTimerMO

    If you would read something besides the Obama Times you would find out that all private insurance is going up from 32 % in some States to 54 % in others because of Obama mandates, who do you think is going to pay for the slug you got living in our basement until he is 27 if you got a girl she most likely be on welfare with a half a dozen kids.

  • OldTimerMO

    I don’t know what cave you live in but every State has had some kind of State medical aid for years in which most of the money is spent on Illegals and people that have sit around for years eating twinkies and either got 6 kids or so fat they cant walk, you may want to spend your money on supporting these slugs but I don’t.

  • Jazzee

    hey all you Obama zombies we “TOLD YOU SO” obamaer LIeD again to you all
    healthcare is going to be a nightmare………….and cost a lot of money besides the big Obama gov controlling everything….call me when you figure it out

  • RegEx

    Jack Lohman, I don’t know what kind of “health care” you were in but it certainly wasn’t in revenue accounting. You totally have no idea what you’re talking about.

  • RegEx

    Evan Wynn — exactly right. If providers made money on Medicare they wouldn’t be walking away from it in droves (I was in a provider’s office today where a patient was told, “We’re sorry, we don’t see Medicare patients anymore.”) We’ve seen more providers walk away from MCR/MCD in the last two years than over the previous 20 years in the business of consulting which physicians.

  • RegEx

    Many, many physicians see Medicare patients because they either (a) do so out of the bottom of their hearts, or (b) do not have any idea they’re losing money on every patient. Private insurance, as you point out, has been subsidizing Medicare for decades. The very private insurance companies that Harry Reid wants to put out of business.

    I don’t know when you were in business, but today, an echo is reimbursed at an average of $126. Medicare is a money losing proposition in almost all specialities.