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More Signs of Rate Shock and Awe

Last week, I reported on my informal survey of health insurance companies and their estimate for how much rates will rise on account of the Affordable Care Act (“Obamacare”).

Today, there are press reports quoting the CEO of Aetna with their estimate. The Aetna estimate is worse than mine.

From Bloomberg:

Health insurance premiums may as much as double for some small businesses and individual buyers in the U.S. when the Affordable Care Act’s major provisions start in 2014, Aetna Inc. (AET)’s chief executive officer said.

While subsidies in the law will shield some people, other consumers who make too much for assistance are in for “premium rate shock,” Mark Bertolini, who runs the third-biggest U.S. health-insurance company, told analysts yesterday at a conference in New York. The prospect has spurred discussion of having Congress delay or phase in parts of the law, he said.

“We’ve shared it all with the people in Washington and I think it’s a big concern,” the CEO said. “We’re going to see some markets go up as much as as 100 percent.”

Bertolini’s prediction is at odds with Congressional Budget Office estimates that the law will have little effect on small and large-employer plans and the Obama administration’s projections that middle-class families will actually save money. The 2010 law is expected to extend health care to about 30 million people who otherwise couldn’t get insurance, paid for by new taxes and fees on companies and wealthier individuals.

Those taxes will make coverage more expensive for insurers, as will other provisions such as a ban on discriminating against people with pre-existing medical conditions, Bertolini said. Premiums are likely to increase 25 percent to 50 percent on average in the small-group and individual markets, he said, citing projections by his Hartford, Connecticut-based company.

You might recall that I found baseline individual rates are likely to rise 30% to 40% with younger people’s rates doubling because of the change in age-rating to 3:1 that will drive substantial rate compression. I found small group rates increasing by about half this.

My sense is that rates in a few states that have already had significant market reforms and already have the most mandates––Massachusetts and New Jersey, for example––will see little change. But for the vast majority of states there will be rate shock.

I can also tell you that, so far, I have detected no serious effort on the part of Democrats to delay anything. Frankly, I think hard core supporters of the new health law and the administration are in denial about what is coming.

I expect more health insurers to be echoing the Aetna’s comments in coming weeks. There is a real concern in the industry they need to get out ahead of this telling people why rates are shooting up to counter the “shoot the messenger” attacks that will be sure to come.

And, while the administration is beginning to understand the disruptive effect of converting to 3:1 age bands, they have not been able to find a way to phase it in or cancel it––the statue is very clear that we have to go to 3:1 age rating on January 1, 2014.

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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High Low Prom Dresses online
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TOM WAITS Whats He Building Shalala.ru

Vanessa Elizebeth
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It won’t pass, AARP is already fighting against it. Too bad those youngsters don’t have the money or a lobby to fight for them.

Ryan
Guest

I think it is important to point out that Aetna’s Medicare Supplement business is not expected to be affected by the Affordable Care Act.

Obviously they will have normal market rate increases that keep up with Medical inflation, but if you go t Medicare Insurance Finders you view their rates in 2012, 2013 and in 6 months from now you will be able to see 2014 rates to confirm they are not giving astronomical rate increases.

bob hertz
Guest

Why have so many journalists under-estimated the subsidies in ACA, and made the ACA sound like just a price-raising frenzy? Here are some possible reasons, other than just mendacity: a. the writers have high incomes and will not get subsidies themselves; b. the Democrats themselves have undersold the subsidies, to carry on the pretense that the ACA will not add to federal spending. The backers of the ACA used many rather tortured fees and assumptions to get the bill to “pay for itself” without raising taxes. Downplaying the subsidies falls into that group. One last point about European taxes. Based… Read more »

Maggie Mahar
Guest

Bob Hertz- (and Barry) You are right: the U.,S. is the only developed country in the world that charges older people more for health insurance. “Ageism” is a major problem in the U.S. Barry ” a somewhat higher rate for those older than 25″ is very, very different from charging people in their 50s and 60s 3 times as much as we charge a 25-year-old for the same policy. In other countries, most people respect the elderly. Here, a great many younger Americans simply resent them. Thus, all of the carping about the cost of “end of life care”. Bob–… Read more »

Maggie Mahar
Guest

Matthew Holt & Spike: Spike quoted Bob L.: “We’re going to see some markets go up as much as as 100 percent.” and added: “That swiss cheese policy we were selling in South Dakote for $49 a month will definitely be a lot more expensive now that we actually have to start covering services!” Matthew Holt then replied: ” Duh–this is precisely the point. If you ban underwriting, the average cost will go up. BUT you’ll get a subsidy to buy it. How is this news???” You’re right Matthew. It’s not news. One question: If it’s not news —and not… Read more »

DeterminedMD
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DeterminedMD

Hmm, read this article in my local paper today, so found the link and forward to all you supporters of this legislation and are awaiting with spell bound breathlessness how such observations will save the country money and resources: http://in.mobile.reuters.com/article/businessNews/idINBRE8BA1D220121211 I love this quote in the middle of the article especially: “”As a nation, we’ve made extraordinary gains in longevity over the past decades, but as individuals we are regressing in our health,” said Dr. Reed Tuckson, a medical adviser at the United Health Foundation and chief of medical affairs at the UnitedHealth Group.” Hey, but Obama the savior will… Read more »

bob hertz
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I am not an expert on the European countries, but my understanding is that France, Germany, and the Scandinavian nations do not have large waiting lists and also do not have stratospheric insurance premiums. As noted earlier in this blog, they accomplish this by: a. higher taxes on everyone, at least 15% for health care……….. and b. health care regulators who are not bought and paid for by the industry. The issue of how to pay hospitals is not without conflict in any country….but in these nations, the health care budget comes first and the hospitals agree to it. There… Read more »

civisisus
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civisisus

Many may somehow conclude from your remarks that europeans’ total per capita outlays for health care exceed our own here. That may be due to your reference to that reviled word, “taxes”.

Here in the US we are ALL taxed by our “system” of health care, just not at all systematically. We’ve tried (endured) this asystematic approach for decades; why so much resistance from otherwise intelligent adults for trying a systematic approach, however initially marginally crappy it may be?

Margalit Gur-Arie
Guest

Interesting choices there, Bob. How come all of developed countries in Europe don’t have to face such choices? Let’s leave out Canada and the UK, because they are different…. What about the others?

What exactly are those “values and culture” that we must deffer to?

bob hertz
Guest

I appear to stand out voted on the efficiency of global budgets for hospitals. That is all right, live and learn. We appear to have an ugly choice between user fees that drive patients broke, although there are almost no waiting lists…………. , versus government budgets that drive governments broke due to turf wars plus generous pay for civil servant nurses, plus the waiting lists. I would rather have my heart attack stopped and later declare bankruptcy, versus dying from delays in care. I have been through bankruptcy and it is much lless onerous than dying. We may be best… Read more »

DeterminedMD
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DeterminedMD

What about those who have another infarction when they see the bill, only to be denied care then?

DeterminedMD
Guest
DeterminedMD

Great, first mandated purchase of insurance, next capitation of expenses by providers and hospitals. I think it would be easier just to have a weekly lottery and the winners get health care coverage for some period of time. In the end, isn’t that sort of what goes on now? By the way, as things stand now, the premise of the movie “Logan’s Run” looks more viable every time new revelations about PPACA come to be known. I’ll keep saying it until the consequences finally affect most PPACA supporters as painfully possible: mandates never work in the end, at least when… Read more »

Barry Carol
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Barry Carol

Bob – One of the key cost control strategies in Canada is to restrict supply. People wait for lots of things besides elective surgery. If it’s not immediately life threatening, expect to wait. If you need a hip replacement and you’re in pain, too bad. It could be six to twelve months before your procedure can be scheduled. If your doctor suspects you may have a brain tumor and wants you to get an MRI, you may wait several months for an image that could be had with little or no wait in the U.S. A friend told me her… Read more »

civisisus
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civisisus

” A friend told me her late father-in-law who lived in one of the large Canadian cities had a tumor on his groin. He was placed on a waiting list for surgery but emergency cases kept jumping ahead of him. He ultimately died two years later and never did have the tumor removed.” Amazing how many people have Canadian friends who’ve had significant care experiences with the Canadian health care system – and almost all of them unfortunate. Positively defies the statistical odds…. Bob, just so we all don’t misunderstand, you and your friend are sure the deceased actually died… Read more »

bob hertz
Guest

Good points, Barry. As for increased utilization- if a hospital is fully supported by taxes, who cares if doctors use it more for minor issues? The nurses are paid for, the building is paid for, the pharmacy is stocked anyways. I used to manage a public library. Once we got our tax revenues, we did not care if we were circulating hot rod magazines or the plays of Shakespeare. I realize that hospitals are complex entities and I know that I tend to glide over their internal problems. Still, I think that Americans are so fixated on a user-fee approach… Read more »

Bill Baar
Guest

Who cares? Good question… I had lunch a few years back with MDs from the UK’s NHS and they told me budgets for Acute, sub Acute, Long Term, etc units were set by different bureaus and it was hard to get funds re allocated for different levels of care because these different groups of Government Officals cared plenty about their little pots of money. So they had all of these bottle necks, overages, and underages, because they had so many units mismatched to their severity. Any time money is involved, somebody cares plenty! Nobody reprograms their budgets just because the… Read more »

Barry Carol
Guest
Barry Carol

Bob – I don’t think the fire department analogy holds up for several reasons. First, we’ve seen a long term secular decline in the number of fires (utilization) and very few fires are deliberately set. Moreover, in most of the suburbs, at least where I live, fire and first aid responders are mainly unpaid volunteers because it would be way too expensive to pay for a full time staff. At the same time, an event like the recent Hurricane Sandy or Hurricane Katrina which stressed first responders beyond their limits could never be paid for through a global budget. Federal… Read more »