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.
“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.
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.
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 [email protected]