The (Not So) Affordable Care Act – Get Ready For Some Startling...

The (Not So) Affordable Care Act – Get Ready For Some Startling Rate Increases

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What will health insurance cost in 2014?

Will the new health insurance exchanges be ready on time or will the law have to be delayed?

There Will Be Sticker Shock! 

First, get ready for some startling rate increases in the individual and small group health insurance marketplace due to the changes the law dictates.In a November 2009 report, the CBO estimated that premiums in the individual market would increase 10% to 13% on account of the health insurance requirements in the ACA. In the under 50 employee small group market, the CBO estimated that premiums would increase by 1% to a decrease of just 2% compared to what they would have been without the ACA. All of these differences in premium would be before income based federal subsidies are applied to anyone’s premiums.

In recent weeks, the Obama administration issued a series of proposed regulations for the health insurance market. Since then, I conducted an informal survey of a number of insurers with substantial individual and small group business. None of the people I talked to are academics or work for a think tank. None of them are in the spin business inside the Beltway. Every one of them has the responsibility for coming up with the correct rates their companies will have to charge.

Hold onto your hat.

On average, expect a 30% to 40% increase in the baseline cost of individual health insurance to account for the new premium taxes, reinsurance costs, benefit mandate increases, and underwriting reforms. Those increases can come in the form of outright price increases or bigger deductibles and co-pays.


In states with the least mandates or for health insurance companies with the tightest underwriting now, the increase could be a lot more.But when you add the impact of the requirement that older consumers can be charged no more than three times as much as the youngest consumers (the usual standard is now a five times difference), premiums increase dramatically for the youngest. 

For example, expect individual health insurance rates for people in their 20s and early 30s to about double.

People in their late 50s and 60s might see net decreases because of the benefit they will get from the rate band compression.

Small group rates won’t increase by quite as much as for those in the individual market––a baseline increase of 10% to 20%. Small group policies won’t be as hard hit as individual policies because the underwriting reforms aren’t as big a leap in this market. But small groups with lots of young people will be hit disproportionately since each person in the group has to be rated on an individual basis and then all of those covered rolled up into an average rate. Older groups might see rate decreases.

And, the new regulations require that insurance companies have to treat their old and new business the same. Most existing business will not come under the “grandfather” rules. That means most existing individual and small group customers can expect pretty much the same thing. That will be a shock to those who already have insurance and don’t think the new law will impact them.

The health law also sets a maximum individual deductible of $2,000 for the “Silver” plan in the small group market. However, the new proposed rules gave insurance companies flexibility to make the deductible higher if they can’t reasonably price such a deductible into a plan and still hit the coverage targets (i.e. covering 70% of all medical costs in the “Silver” plan). That flexibility is there for only one reason––it’s looking more and more like the health plans will have to put higher deductibles on at least some of these plans so that they can comply with the overall cost and coverage requirements.

Come October 1, consumers will find that they will be faced with very comprehensive health plans but those plans––including the lower cost “Bronze” and “Silver” plans––will have very high deductibles. Middle class families (300% to 400% of poverty), who aren’t fortunate enough to be in employer-sponsored plans and will be eligible for only partial federal premium subsidies, will still have to pay many thousands of dollars in premiums. They will also be confronted with a choice––pay the big premiums for a plan that will cover only 60% or 70% of their health care costs, with a big upfront deductible, or pay a fine equal to 1% of their income for each adult in the family.

Consumers with incomes in excess of 400% of poverty ($46,000 single and $92,000 family of four in 2014) are going to have to pay the full cost of these health insurance policies. But consumers who make less than 400% of poverty will have their premiums capped at a percentage of their income. So, anyone getting a subsidy will be insulated from the very highest premiums. Who will pick up the rest of the premium? Federal taxpayers.

Will the Health Insurance Exchanges Be Ready On Time?
In ten months, Americans without access to employer health plans are due to be able to purchase their own health insurance on the new health insurance exchanges.

So far, only 18 states have said they will run their new insurance exchange––and that does not necessarily mean they will all be ready. The feds are required to run the exchange if the state won’t do it––20 have already said they won’t do it and five more are “partnering,” which essentially means they are leaving most of the work to the feds.

Complicating this even further, ten months out we are still waiting for the detailed rules on how those insurance exchanges are supposed to operate.

Will the feds be ready to provide an insurance exchange in all of the states that don’t have one on October 1, 2013?

I have no idea. And neither does anyone else I talk to inside the Beltway. We only hear vague reports that parts of the new federal exchange information systems are in testing.

The former CIA director couldn’t get away with an affair in this town but the Obama administration has a complete lid on just where they are on health insurance exchanges and haven’t shown any willingness to want to talk about their progress toward launching on time––except to tell us all not to worry.

We are all worried. I would not want to be responsible for the work that remains and only have ten months to do it.

The feds keep extending the states’ deadlines but there is one deadline that isn’t moving––October 1, 2013.

Another Big Date
Given the big rate increases that are coming because of the ACA and the political risk the Obama administration faces if they don’t get the exchanges up on time, I would suggest there is another big date they need to be worried about––November 4, 2014.

The Republicans said this would not work. If it does not launch on time, or does with serious problems, I would not want to be an incumbent Democrat.

I told them not to call this the “Affordable Care Act.”

Robert Laszewski has been a fixture in Washington health policy circles for the better part of three decades. He currently serves as the president of Health Policy and Strategy Associates of Alexandria, Virginia. You can read more of his thoughtful analysis of healthcare industry trends at The Health Policy and Marketplace Blog, where this post first appeared.

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76 Comments on "The (Not So) Affordable Care Act – Get Ready For Some Startling Rate Increases"


Guest
Dec 5, 2012

This is one HUGE [bleeping] Cluster[bleep] awaiting in the wings. I can’t even get my head around how much money that could otherwise got to ACTUAL health care will be diverted to administer this Welfare / Corporate Welfare program.

Guest
Craig "Quack" Vickstrom, M.D.
Dec 5, 2012

This is what us democratic socialists were trying to tell the of the country. If we are going to have 3rd party payers, they are going to have to be regulated to within a inch of their lives. Otherwise, this simply is not going to work.

Guest
Dec 5, 2012

See my 2009 post “Public Optional.”

http://bgladd.blogspot.com/2009/08/public-optional.html

Guest
spike
Dec 5, 2012

Republicans: Committed to the idea that government doesn’t work and to proving it.

Obviously the implementation would be smoother if Republicans didn’t go “scorched earth” on very reasonable reforms to the health insurance market.

Also, Mr. Laszewski concedes that many people will see health insurance premiums drop. One also wonders what the long-term trend in out-of-pocket costs will be. Of course there will be a one-time jump in prices when there’s a one-time jump in quality of product being purchased. Does the long-term trend line indicate higher or slower rate of increase in out-of-pocket costs?

Mr. Laszewski doesn’t say, because his role, for whatever reason, is not to provide insight or valuable information, but to be a cheerleader for the healthcare status quo, as he as been since the Affordable Care Act was first proposed.

Guest
Kevin
Dec 7, 2012

Lets be very clear here, this was never reform. Tort Reform would have been included, 1/3 of the costs. Also de regulation would have been included. They all completely missed the boat. Should have gone back to 1993 and look at what Rostenkowski did, Catastrophic Health Insurance for all is the real answer. Every has the big stuff covered and everybody pays. Then let people buy whatever insurance they want to cover whatever they want in an unregulated market with a capped risk.

Guest
stillafreeamerican
Dec 19, 2012

Spike, I have attended 22 hours of formal training on the health care bill. Federal assistance is calculated on the houshold income not the individuals income. So, add up everyone who lives in your home to get your household income. Then the federal government will let you know if you owe money or will get some level of assitance. If your household income hits 99k everyone in that household will be told they can afford health insurance and they could owe money back to the fed – this means everyone in the household. The democrats and obama put a loop hole in the bill that allows business to take a $166 a month penalty per employee and not offer health care insurance. Walmart, applebees, and the rest of the big chain resturants have already started doing this which means their employees will now fall under the household income rule to determine their level of assistance. The health care bill is a tax increase bill period. Just to be clear I am an independent voter and will never be a democrat or republican so this is not a political statement just the truth.

Guest
Dec 5, 2012

Lets wait and see what happens before scaring everyone.

Guest
Kevin
Jan 3, 2014

Are you scared yet? Do you now understand this whole mess was by design. The plan was to get everyone off existing plans and force everyone to buy more expensive plans with options they do not want or need.

This will go down as one of the biggest frauds every.

Guest
spike
Dec 5, 2012

Another thing to consider: What Mr. Laszewski is measuring is out-of-pocket costs associated with covered health care services.

What about the fact that due to the mandatory coverages associated with ACA there will be a dramatic reduction in non-covered services? Therefore, either patients will be accessing more service now that they’re covered, or they’ll be accessing the same service and ultimately paying less for them because at least now they’re getting partial coverage for those services, which they weren’t getting before on their bargain-basement insurance plan.

Guest
Dec 5, 2012

Great post Robert, but I think it’s only the beginning.

Guest
Peter1
Dec 5, 2012

Not sure how accurate Laszewski’s predictions are but I’ll not be surprised in this profit driven system if he is right.

I have stated I am in favor of a mandate but not when we are forced to buy into the most expensive system in the world. I’ll just either not buy or pay the penalty if rates are unreasonable.

It’s clear that providers (including insurance) corporate or otherwise, will as usual continue to rack it in while the middle class are left to spin in the wind.

Individual taxpayers don’t stand a chance against the 1000s of corporate lobbyists bribing politicians to enact law in their favor. Don’t count on Democrats for ethical behavior either.

Guest
Cynthia
Dec 5, 2012

What we need is a more efficient healthcare system. The most efficient would be a government-run single payer system. It would save huge amounts of money, because [1] the government does not need to make a profit for investors, just break even; [2] the government does not need to pay exorbitant fees to top executives and huge bonuses; [3] with a single payer system, an enormous number of manpower hours, office bookkeeping staff, and paperwork could be reduced, whereas at present, with so many different insurance companies involved, each with different computer programs and different criteria, doctors’ offices and hospitals require a lot of bookkeeping and staff to deal with communications. The insurance companies would still have a significant role to play, providing supplemental insurance to those who are willing and able to afford it. But basic healthcare would be covered for everyone by the single-payer system. This would be the most efficient, most cost-effective, most rational, and most caring way to deal with the problems we currently face.

Guest
Peter1
Dec 5, 2012

It was called the “public option”, but Obama and the dems bowed to corporate interests.

Guest
MD as HELL
Dec 6, 2012

Who do you think funded his campaign? You?

Guest
OLDRN
Dec 5, 2012

I can tell you from working in the trenches that govt run insurance (mCare & mCaid) is the most bureaucratic, inefficient and confusing payer when compared to the private Blues, et al. My hospital system has a team of nurses, physicians & attorneys on retainer to wade through and fight the CMS nightmare of changing and conflicting regulations. Whereas, the commercial insurance companies have a profit motive to be streamlined and efficient. My job in “audit recovery”, helping to fight medicare denials, exists to do clinical battle with MCare, not Blue.

Guest
Peter1
Dec 5, 2012

But have checked on how efficient single-pay/government run/controlled systems are in other countries.

Don’t look to the U.S. for efficient government run – at least not yet.

Guest
Maxwell
Mar 20, 2013

Nicely stated. The key elements of the single payer systems from very successful health care systems like Germany, France, Taiwan, England is that a) everyone has access, 2)the goverment determines essential health benefits/procedures that every insurer must cover, 3) the government sets the price for all these procedures. There is still lots of room for private insurers and private, for profit, healthcare providers. Also, the goverment would decide on a uniform data collection system that all providers would use….this would save billions…because providers and data systems could actually talk to eachother. Neat ideas…..Im not holding my breathe however.

Its interesting that many of these countries actually have more provider choice than we do and the waiting time argument doesnt hold water im most cases either.

Guest
Kevin
Jan 3, 2014

You are kidding right? We gave them 1 Billion dollars and 3 1/2 years to built a website and it still does not work. Government is the problem not the solution.

Guest
Zell
Dec 2, 2014

Kevin– way to revisit the comments two years later after the successful launch of the PPACA. I’d be defensive too. But really, this inefficient Heritage Foundation plan is nothing but a cop to the lobbyist constituencies who have long purchased health policy legislation in Washington with zero heed for patient impact. Sour grapes at the close of “guild medicine” by hc profiteers is amusing, but the refusal to acknowledge how much better those evil socialists over in France are pulling off public medicine is downright knee-slapping. Time to start trading in yr Maseratis and advising your kids to pursue high finance or big law…no $$$ in medicine anymore :-)

Guest
Dec 5, 2012

Well, single payer systems are not efficient either. Ultimately, they become bogged down by their own bureaucratic weight, and cause long waits for essential services. This is evidenced time and time again by systems like the Canadian healthcare system. These kinds of problems are evidenced in the medical literature-long waits to see specialists, have colonoscopies, etc. etc. In fact, the Canadian system is starting to go the other way, from a single payer, to actually allowing privatizaion.

Guest
Peter1
Dec 5, 2012

Yes, the Canadian system is evolving to a U.S. private model because it makes so much sense. Really?

Do Canadians want to scrap their government system?

Here’s an up to date pole (2012) which shows Canadians want access to private but also want the security (and price) of the government system.

http://www.canada.com/health/Canadians+want+choice+they+access+health+care+poll/6850577/story.html

There have been great strides in addressing Canadian wait times over the years and with all health systems throughout the world they are evolving.

And if you look at the much touted Quebec decision that right wingers point to here is some reality on private care in Quebec following that decision.

http://www.cbc.ca/news/canada/montreal/story/2009/03/30/mtl-health-insurance-interest-0330.html

Guest
Peter1
Dec 5, 2012

My full comment is “awaiting moderation” – curses, due to a couple of links.

In short if Canadians want some form of private option then allow Americans to have a public option.

A comprehensive report on Canadian health care financing can be found here:

https://secure.cihi.ca/free_products/nhex_trends_report_2011_en.pdf

Guest
DeterminedMD
Dec 5, 2012

I break my silence for this one comment on PPACA: all you fraudulent supporters of this legislation, I hope you choke on it!

Yeah, but we won’t hear from them, will we? Liars are first out the door.

Like I said earlier, Obama wanted 4 more years, well, I hope he chokes the most! Oh, and he’s still a smoker too?

Guest
southern doc
Dec 5, 2012

Always a pleasure to hear from you.

Guest
Dec 5, 2012

“I break my silence for this one”
__

That’s a relief, we thought you were finally gone.

Guest
Dec 5, 2012

Now that it has become clear that Obamacare will happen, the fear-mongering is becoming truly hysterical..

Just a few facts that this post ignores:

Insurers will have to pay out 80% (to small groups) to 85% (to large groups) of the premiums they receive to providers and patients for actual health care– or send rebates to customers.
Administrative items like the fees that they pay out to agents and brokers don’t count.

If premiums go up 30% this means they would have to increase the amount they spend on healthcare by 25%. HOW?

Already they’re giving customers rebates.

Older Americans who live in states where insurers can charge them 5 times more than they charge 25-year-olds for the same policy will see their rates go down. (Under the ACA insurers can charge them a max of 3 times more.)

Those suffering from “pre-existing conditions” will see their rates fall.

In the Excahnges, individuals and small businesses will become part of a “large group” and qualify for significantly lower rates.

Women now pay up to 30% more than men for a policy that doesn’t even cover maternity.
Women are also much more vulnerable to being labeled as suffering from a “pre-existing condttion”– because they have had a C-section, because they have been the victim of domestic violence, because they are infertile . .

A great many women will see their premiums fall. At the same time they will see their health care expenses fall because they will no longer have to pay for conctraception (the Pill is now very expensive) OB-GYN check-ups and other items listed as “preventive care.”

Under Obamacare, some people will see their premiums rise, others will see them fall.

Meanwhile, most will find that their insurance offers far better protection than ever before. Better financial protection (caps on out of pocket expenses) and better physical protection (all essential benefits and
free preventive care.)

Guest
MD as HELL
Dec 6, 2012

And most still do not need any of this coverage or care.

Guest
stillafreeamerican
Dec 19, 2012

Your rates and coverage costs will be calculated by the houshold income – if you do not have health insurance. Some insurances does not qualify and the federal government will have a list of approved providers. Since the penalty for not offering insurance is only $166 per employee per month many companies have already told their employees that they will cancel the company health insurance. So, the number of people that will be forced on the federal program will go up. Please stop believing what you hear on TV and the radio go to any tax or cpa web site and find out the truth.

Guest
stillafreeamerican
Dec 19, 2012

Maggie, please go to any CPA or TAX web site to find out the truth about the health care law. Stop believing the democrats, republicans or most if not all of the main stream media they are all bias. Your posts sound like a comercial for NBC or FOX. The IRS issued a 159 page clarification on 1 page of the health care law. —- Dont be fooled this is a tax increase bill……..

Guest
Dec 5, 2012

Indeed, public opinion polls in Cananda do indicate that given the choice, many citizens would choose a mixed model-privat/public. Many in the US do not realize that one payer systems do not always accomodate all of the preventive types of programs that we are so accustomed to. This is simply because it is not cost effective. For example, mammography, considered the gold standard for breast cancer detection, is recommended at age 50 (in Canada). Provinces do differ on this, but it is not like here in the US where mammos are automatically recommended at the age of 40. Here in the US, colonoscopy is considered the procedure of choice (and the most definitive) for diagnosis and screening of colon cancer. In Canada, is being for colon cancer is now being promoted-but through the use of fecal occult blood tests. Waits for colonoscopies are still unacceptably long. The point being, many people do not realize that the “universal” model does not assure high level preventive care at all. In fact, it probably diminishes it.

Guest
Peter1
Dec 5, 2012

Margot, Canadians wishing to jump the so called “queues” want to because they are financially able to – maybe a testament to their better performing economy. Are Americans getting better off financially that they want to keep spending over double what other countries spend on health care?

As well with the public system as competition private pay health care in Canada is less than private pay U.S.A. I know, because I have paid for private care in Canada (cataracts) that was out of reach here in U.S.

Guest
Dec 5, 2012

Part of the problem with all these empirical arguments — including yours — is that of shooting at a moving target.

Guest
DeterminedMD
Dec 5, 2012

I guess it all depends on how you define “some”, easy to hide behind vague terms when later facts demand specificity. “Some” politicians and political hack supporters don’t tell the truth, “some” just fudge the numbers, and “some” are just inconveniently disingenuous. The “some” who are watching out for the public interest, well, that is just random chance, could be called “some” by some. Ain’t that something!?

Guest
Dec 5, 2012

Sorry, meant to say the screening for colon ca in Canada is being promoted, but through the use of fecal occult blood tests. This is not definitive at all and falls far short of colonoscopy. Universal, or one payer systems struggle to maintain high quality, true preventive type screenings. Cost is prohibitive.

Guest
Peter1
Dec 5, 2012

Margot, where are you getting your information?

http://www.cmaj.ca/content/165/2/206.full

Guest
MFreeman
Dec 5, 2012

Since insurers are forced to contain their profit as percentage of expenditures, with a healthy competitive environment, escalating costs will and should be placed on the bureaucratic disaster whose march is just advancing toward us from the horizon. It made no sense, it still makes no sense. How much suffering do we need to see in this world to learn that socialist systems can not work…period…human nature will never, ever allow it. Man isn’t evil….he’s just human. Get over it. Do the best we can with capitalism, the best of the imperfect worlds we must choose from.

Guest
Peter1
Dec 5, 2012

“How much suffering do we need to see in this world to learn that socialist systems can not work…period”

Which “socialist system”? Medicare, Medicaid, tax free employer subsidized health care. How’s the uninsured free market working for you?

Guest
Dec 5, 2012

What is the moral basis for an economy, in your view?

Guest
mfreeman
Dec 5, 2012

Peter1,

Wake up.
Believe me, I will personally not suffer for what is to come as our government engineers health care as it sees fit. I’m already getting paid the tens of thousands of dollars from our federal government with every man’s tax dollars, as long as I jump through the hoops of employing an immature EHR industry product. I’m approved for a big federal check in the coming weeks. As a manipulated doctor I am baffled by what we’re becoming, disheartened, but I have a little more cash for my compliance. In the meantime, since implementing the EHR, in order to meet “meaningful use”, I have had to hire an additional employee specifically to meet the government requirements. At some point, this new employee multiplied by thousands of medical practices will be one more huge non-essential cost which will only come out of care dollars, entirely due to federal mandates. Perhaps I will take home a little less money with a new employee, but the real tragedy…patient’s will pay even more…the system will pay even more. I see it day after day…less care, less professional judgment, less productivity, more central control.

The free market works. I have no obligation to subsidize my employee’s healthcare…but I do. That is capitalism. if I didn’t, they could choose to stay with me or not. It’s that simple. Human’s (including myself) only function by way of improving by competition (it’s in the brain). No competition means no generativity and societal death. We compete for a mate, for financial stability, for our children’s opportunities, etc.
The government doesn’t make our problems better, it just complicates them with unintended consequences. making them MORE difficult to solve. In my view, it is an arrogant and foolish game to empower government to control the behavior of humans. One powerful entity will never be as smart as the result of fair competition between individuals. Competition between individuals will outperform government any day. Programs to help the poor and disabled are entirely consistent with capitalism. Capitalism does not mean lack of caring and love for man. In my view, subsidizing the healthcare and retirement of able-bodied people promotes helplessness, passivity, and societal failure. Time (unfortunately) will reveal this truth.

Guest
Peter1
Dec 6, 2012

“Competition between individuals will outperform government any day. Programs to help the poor and disabled are entirely consistent with capitalism. ”

Delusional mfreeman, does this “competition” include the thousands of corporate lobbyists bribing politicians to enact legislation that works against individual citizens? And does this “competition” also include corporate ownership of related industries selling under different names but with one corporate owner giving the illusion of competition?

Conceptually your views have merit, in reality you need to get your head out of the ideology hole it’s buried in.

Guest
MFreeman
Dec 6, 2012

Not ideology at all, just human behavior. If humans could do well with a socialized system, I’d be all for it. They don’t. The human mind is necessarily survival oriented, like any other animal. Capitalism harnesses the natural drive of humans to survive while setting basic parameters. Companies, government, unions, all of these subvert the will of the individual. I would put severe restrictions on all of them with regard to political involvement, with crippling punishments. If the Supreme Court continues to support the consolidation of corporate and union power, I will be willing to suffer knowing that we tried to do the right thing. Just because it is difficult, if the views “have merit” as you say, they should NEVER BE LET TO DIE, in my opinion. Otherwise, it would be very easy to lose hope for the future of our children.

Guest
Peter1
Dec 6, 2012

MF, it’s not that you will let those ideas die, they will be taken away from you in practice by political power and you will be left with only ideas. You will still get the vote as give the illusion of a say, but for the most part your elected officials will work against you in favor of their corporate sponsors.

If only this was a result of Supreme Court decisions, this is the day to day functioning of a political process given birth in the late 70’s when corporations and their business partners/cohorts launched their lobbying onslaught of DC. The Unions have largely been helpless to stop it proven by their massively reduced influence and membership over the last 30 years.

It is no accident (or fate of competition) that the plight of the middle class is as it is.

Guest
MFreeman
Dec 6, 2012

I appreciate the respectful exchange. We have somewhat similar viewpoints, but very different views of a solution which won’t be reconciled here. Anyway, best wishes to us all and have a nice holiday Peter1.