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Sebelius: Premiums may jump under ACA

Actuaries pin cost increase on new policy for pre-existing conditions

March 27, 2013

HHS Secretary Kathleen Sebelius on Tuesday acknowledged that some Affordable Care Act provisions could cause health insurance premiums to rise in the individual market, particularly for men and younger individuals.

Sebelius was responding to a study released by the Society of Actuaries. The study concluded that health insurers likely will have to pay an average of 32% more for medical claims under the ACA, largely because of a provision that prohibits insurers from denying coverage to individuals with pre-existing medical conditions. That will add more costly, sicker individuals to the insurance pool—and potentially could result in higher insurance premiums for some consumers.

Report findings: Significant cost growth in some states 

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. 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 variations 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.

Calif. officials refute report

The Society of Actuaries report estimated that medical claim costs for individual policyholders in California would increase by as much as 62% by 2017. 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.

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, "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."

White House also critical—but acknowledges possible cost growth

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

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." 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 (Radnofsky, Wall Street Journal, 3/26; Mason/Morgan, Reuters, 3/26; Alonso-Zaldivar, AP/U-T San Diego, 3/26; Lin, AP/Atlanta Journal-Constitution, 3/26).

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