Health Insurers To Pay More for Medical Claims Under ACA, Report Says
Health insurers likely will have to pay an average of 32% more for medical claims under the Affordable Care Act, which potentially could result in higher insurance premiums for some consumers, according to a report released Tuesday by the Society of Actuaries, AP/U-T San Diego reports.
For the report, researchers analyzed a model of the effects of the ACA's insurance expansion in the individual market in each state.
According to AP/U-T San Diego, the report did not attempt to estimate the effects on medical claims for those with employer-sponsored health plans, mainly because the ACA's insurance expansion is focused on individuals who do not have insurance through their employers.
The report also did not account for the effect of insurance subsidies, insurer competition and other factors that could offset the cost increases, according to Kristi Bohn, an actuary who worked on the report. Bohn said the objective was to examine the underlying cost of medical care.
The report found that while medical claims costs per individual policyholder in some states would decline, a large majority of states would see double-digit increases in claims costs.
The researchers explained that the costs would increase largely because an ACA provision scheduled to take effect on Jan. 1, 2014 prohibits insurers from denying coverage to individuals with pre-existing medical conditions, which could potentially add more costly, sicker individuals to the insurance pool.
The report also highlighted wide disparities in the projected claims cost increases among states. For example, by 2017, the estimated claims costs increase would be as high as:
- 80% in Ohio;
- 67% in Maryland; and
- More than 20% in Florida.
Researchers attributed the disparities in part to the variances in states' populations and insurance rules. The report noted that some states already have laws banning insurers from charging higher rates to seniors and sicker individuals, which would result in smaller claims costs increases (Alonso-Zaldivar, AP/U-T San Diego, 3/26).
Calif. Officials Refute Report's Claims
The Society of Actuaries report estimated that medical claim costs for individual policyholders in California would increase by as much as 62% by 2017. The report noted that the cost increase would have been lower -- about 55% -- if the state opted out of the Medicaid expansion, the AP/Atlanta Journal-Constitution reports.
As a result, state residents who plan to purchase individual coverage plans through Covered California -- the state's health benefit exchange -- could have to pay higher premiums, the study found. State officials have estimated that more than four million uninsured residents are expected to purchase private coverage through Covered California by 2019.
Officials with Covered California described the report as "misleading" because it failed to consider a range of cost reduction efforts, like the federal insurance subsidies, the AP/Journal-Constitution reports.
Oscar Hidalgo, a spokesperson for Covered California, said the subsidies "will reduce overall costs by as much as 60% to 90% for millions of California residents," adding, "In addition, having a health plan marketplace with considerable purchasing power such as Covered California has a positive impact on rates that is not factored into this report" (Lin, AP/Atlanta Journal-Constitution, 3/26).
Obama Administration Questions Study Design, Acknowledges Potential Increases
The Obama administration expressed similar criticisms about the Society of Actuaries' report, saying that it focused only on one piece of the expansion and ignored its numerous strategies to offset the cost increases (AP/U-T San Diego, 3/26).
However during a White House press briefing Tuesday, HHS Secretary Kathleen Sebelius acknowledged that some ACA provisions could cause health insurance premiums to rise in the individual market, particularly for men and younger individuals, Reuters reports.
Sebelius said, "Women are going to see some lower costs, some men are going to see some higher costs," adding, "It's sort of a one to one shift ... some of the older customers may see a slight decline, and some of the younger ones are going to see a slight increase" (Mason/Morgan, Reuters, 3/26).
Sebelius noted that the administration "feel[s] 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" (Radnofsky, Wall Street Journal, 3/26).
She added that right now, "[e]verything is speculation" and definitive data on costs would not be available until later this year when health plans become fully authorized to sell coverage through the ACA's health insurance exchanges (Reuters, 3/26).
Advocacy Group Criticizes IRS' Tax Credits Eligibility Rule
In related news, Families USA on Tuesday criticized a final rule under the ACA that determines who will be eligible for the law's tax credits, saying it will force millions of U.S. residents to be priced out of the system, Reuters reports.
Under the ACA, individuals who do not have access to affordable health coverage -- or less than 9.5% of a worker's household income -- through an employer will be eligible to receive tax credits to purchase insurance.
However, IRS' final rule states that affordability should be strictly based on individual coverage costs, meaning that workers would not be eligible for the tax credits to buy insurance for non-working dependents even if family coverage is greater than the 9.5% threshold.
During a conference call Tuesday, Ron Pollack -- executive director of Families USA -- called the issue a "family glitch problem" that must be addressed (Brown, Reuters, 3/26).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.