By M.D. Kittle | Wisconsin Reporter
Some four months after the U.S. Supreme Court upheld the core of the contentious Patient Protection and Affordable Care Act and less than two weeks before the nation effectively decides the law’s future at the polls, the debate over how much it will cost and just who will pay rages on.
The Obama administration and supporters of what Republicans and opponents of the health care act at large have derisively dubbed “Obamacare” charge the ACA already has saved Americans billions of dollars and will save tens of billions going forward.
But like just about every other federal spending program, some may save, but somebody’s going to have to pay.
“(T)he Affordable Care Act was designed primarily to increase coverage, not to control costs,” said Jack McDermott, spokesman for the Florida Office of Insurance Regulation.
While health insurers will be asked to shoulder a big chunk of the cost of health care reform, a Watchdog.org analysis finds increased insurance premium costs will be borne by many health care consumers. Some rate hikes already have hit, and the impact is expected to be more pronounced in 2014, when the brunt of the act goes into effect, according to insurance regulators in many of the election year battle ground states surveyed by the news organization.
“We’re expecting to see some significant increases,” said J.P Wieske, public information officer and legislative liaison for the Wisconsin Office of the Commissioner of Insurance.
Badger State projections
The Wisconsin Office of the Commissioner of Insurance commissioned a report last year that projected insurance rate increases of 31 percent for nearly 60 percent of the individual market, those consumers not on government or employee-sponsored health insurance.
The report, completed by Gorman Actuarial LLC, Jennifer Smagula, a health-care actuary, and Jonathan Gruber, a professor of economics at the Massachusetts Institute of Technology, did caution that some of the increases would be alleviated through the impact of the reinsurance program in state-administered health care insurance exchanges. Wisconsin, directed by Gov. Scott Walker, has to date declined to set up an exchange. The report also noted subsidies could defray rate increases by 10 percent.
The most contentious portion of the massive health care law, the individual mandate, requiring all Americans to purchase at least minimum coverage, is set to go into effect in 2014.
Prior to federal subsidies aimed at covering or reducing the cost of health insurance in the exchanges, 87 percent of the individual market will experience an average premium increase of 41 percent, the report found. The average increase for the entire individual market is projected at 30 percent.
Individual, or non-group, health insurance covered bout 14 million nonelderly people in the United States in 2010, according to a Kaiser Family Foundation “Survey of People Who Purchase Their Own Insurance.”
The Wisconsin report projects 41 percent of individual market health insurance consumers in the state will see average premium decreases of 56 percent, compared to pre-reform rates. Four-fifths of the population would receive subsidies of some kind. Savings also would be accrued through the act’s provision that drastically lowers the rate differential between older and younger health care consumers to a maximum ratio of 3 to 1.
What does it all mean? Some Wisconsinites will see big savings. Others could see steep increases.
A different Robin Hood?
In the case of the individual market in particular, ACA effectively takes from the young to give to the old, said Robert Zirkelbach, spokesman for Washington, D.C.–based America’s Health Insurance Plans, or AHIP, the national trade association representing the health insurance industry.
“There is broad agreement that the younger and healthier people are needed in the system to keep coverage affordable,” he said.
For the young and healthy who have forsaken insurance coverage for just that reason, the requirement to have insurance or pay a penalty immediately hits the pocketbook.
But there are additional pressures on the cost structure.
A new premium sales tax will cost insurers $8 billion in 2014, and tens of billions of dollars in the years to come. Somebody has to pay for that, and as the law of expense pass-through goes, it will be health insurance consumers. AHIP projects a 2 percent to 3 percent average rate increase just from the premium tax.
The health care law does require insurers to mark 80 percent of their expenditures for actual health care costs, and only 20 percent can go to non-medical expenses such as marketing, raises for CEOS and infrastructure.
While the ACA’s prohibition on denying health care to those with pre-existing conditions is arguably the law’s humane center, the provision comes with a cost to insurers, and, Zirkelbach said, ultimately to consumers.
And the minimum coverage requirement expands a suite of health care categories currently not outlined in most basic plans, adding expense to the system.
“We’re talking about significant increases, depending on who you are,” he said. “For people with less comprehensive and more affordable insurance today or small businesses that are only able to offer basic package to their employees, there will be a significant rate increase.”
The U.S. Department of Health and Human Services counters that the health care act savings already are significant and real for many Americans.
Under the law’s rate review provision, some two-thirds of requested insurer rate increases above 10 percent have been deemed “unreasonable increases in premiums for health insurance coverage,” according to HHS. The implemented rate increases were reduced on average by 2.8 percent. Rate review has led to lower premiums for some 800,000 consumers, according to an HHS report.
In the individual market, 547,000 consumers saw lower rate increases than insurers requested, a savings of about $104 million, the report states.
HHS estimates the national average rate increase implemented in the individual market in 2011 was approximately 1.4 percent lower than the increase originally requested by insurance companies.
“Thanks to the Affordable Care Act, Americans across the country have already seen a savings of over $2 billion on their premiums,” said Fabien Levy, HHS press secretary. “Rate review rules are preventing insurance companies from raising rates with no accountability or transparency, and the 80/20 rule has already helped deliver rebates to 13 million consumers who did not receive adequate value for their premium dollars last year.”
Looking ahead, HHS projects negotiating power among multiple insurers in the exchanges, expanded preventive care, and the vast reduction of the so-called “hidden tax” of uncompensated care will offset premium increases.
‘Widespread and expensive’
The question state insurance regulators are asking is will the offsets be enough to slow ACA-related rate growth?
In Nevada, the answer is no, Scott Kipper, commissioner of the Nevada Division of Insurance said.
“The individuals who are going to experience the most pain are in the existing insurance market,” he said.
Glenn Shippey, actuary with the division’s life and health section, said carriers are projecting rate hikes for existing policyholders of 25 percent to 50 percent in the individual market.
A report commissioned 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 ultimately inflated, however, reflecting pre-subsidy rates.
The post-ACA changes are projected to lead to rate increases of about 8 percent to 12 percent for the individual market, and between 5 percent and 15 percent for the small group market, not including annual health trend increases. Large group premiums are projected to rise by as much as 5 percent.
“As I have been saying, the impacts of Obamacare will be widespread and expensive,” Ohio Lt. Gov. Mary Taylor, who serves as director of the state’s Department of Insurance, said in a statement last year. “This report clearly shows what I have long predicted; Obamacare will result in bigger government, unsustainable costs, and ultimately, less consumer choice.”
Tracking ACA so far
Unlike many other states, Colorado has done some analysis on the cost of ACA to date.
The Colorado Department of Regulatory Agencies Division of Insurance asked state-regulated carriers about the impact of the first phase of ACA implementation. While insurers reported small increases related to the law in general, rate hikes varied by category.
For insurance renewals, the high ends of premium increases on the individual market were:
- 4.9 percent for the individual market
- 1.2 percent for the small group
- 4 percent for the large group
For new policies, the increases were:
- 1.3 percent to 7.8 percent for the individual market
- .6 percent to 2.5 percent for the small group
- Flat to 5 percent for the large group
But those numbers are based on a limited universe of 450,000 covered lives under the first wave of changes under the law, according to division spokeswoman Marianne Goodland. When the full force of the changes goes into effect, including the individual mandate, more than 10.4 million consumers are expected to be impacted.
The Iowa Insurance Division, to date, has found relatively small ACA-related increases noted in rate filings, according to division spokesman Tom Alger. Of the dozen companies that have filed requests for increases, Alger said about a half a dozen have noted increases due to the health care law, averaging about 1 percent of the overall hike.
“We are just starting to see some filings, some of which are indicating some increase attributable to that,” he said.
But Alger, like his counterparts in other states, said the brunt of the law has yet to be implemented and much remains unknown.
Insurance regulators in Florida and Virginia said there are just too many variables to project costs without more information on implementation.
The ultimate payoff, ACA proponents assert, is a wider coverage net for America’s uninsured.
The Congressional Budget Office projects 32 million more people will have insurance by 2019, cutting the current number of uninsured by more than half.
In Wisconsin, for instance, the number of uninsured is projected to decline by 340,000, or 65 percent by 2016, according to the Wisconsin health insurance market report. By contrast, the report’s authors estimate only 62,000 uninsured would gain coverage if the individual mandate is repealed, leaving 460,000 uninsured.
Opponents of the health care act don’t dispute the ACA’s impact on the uninsured, but they question the costs of expanding the size and scope of government and the quality of the new health care system.
A study by the free-market think tank Heritage Foundation notes 16 million of the uninsured will be added to Medicaid, a group of insured with traditionally higher care costs.
“Though under new law, the federal government will cover the cost of expanding benefits in the initial years, states will have to pay the additional administrative costs of the expansion. And after 2017, the states will begin to pay a portion of the benefits expansion as well,” the report notes.
The ACA tap dance
Nevada insurance regulators hold a weekly meeting to talk health care law changes. Kipper said the division is furiously working to meet looming deadlines without direction from the federal government.
“That makes if difficult, if not impossible, for states to make a responsible decision,” the commissioner said. “We’re doing a lot of tap dancing.”
Also looming, a general election that could change political control and, consequently, the health care law. Republicans have vowed to repeal and replace the law if they take control of Congress and the White House.
State insurance regulators must forge ahead, despite the unsettled political climate and growing frustration with the federal government.
“I don’t know that we have time to be frustrated. We have so much to do to get this thing up and running,” Colorado’s Goodland said.
Contact M.D. Kittle at [email protected]