Small businesses and individual health policy holders could face dramatic premium spikes this year, as some insurers file double digit increases and attribute the changes to the Affordable Care Act. The sticker shock is mostly the result of rising health care costs — and the prevalence of sicker beneficiaries in health insurance risk pools. The media, however, is blaming health care reform.
For instance, Friday’s Politico reported that premiums are increasing across the country as “All those new consumer benefits packed into the health reform law — birth control without a co-pay, free preventive care and limits on when insurers can turn down a customer — had to be paid for somehow.” Policy holders may experience 10 to 20 percent rate hikes, it warns, as insurers are “working the health reform law’s 2014 fees into their 2013 bills.”
So how much is Obamacare responsible for? Five, maybe eight percent? The answer is less than two.
Insurers are arguing that the costs of Obamacare’s annual fee on the industry, its requirement that companies contribute to a reinsurance program, and new benefits and regulations have to be passed down to consumers. “There’s a massive new health insurance tax that starts in 2014,” Robert Zirkelbach, the spokesman for America’s Health Insurance Plans told Politico. “For policies that are sold in 2013 and extend into next year, there’s going to be taxes imposed. … As a result, like all taxes, they will be reflected in premiums charged.”
There are new costs in 2014, but they have little to do with reform. Consider the insurers’ own rate justification filings, in which companies have to substantiate the raises. Aetna in Pennsylvania, for instance, seeks to increase rates by an average of 16.49 percent, but as it explains in its filing, 63.18 percent of the increase is attributed to the “cost of providing healthcare services to policyholders.” The Affordable Care Act is responsible for a tiny portion of the increase:
Impact of New Taxes and Fees
The Affordable Care Act (ACA) includes several new taxes and fees payable in 2014, including two that specifically apply to insured products — the health insurer fee and the reinsurance contribution. These new fees result in additional costs and are reflected in our updated rates for policies that extend into 2014. The overall impact of these costs on this filing is as follows:
* Health Insurer Fee: 1.0%
* Reinsurance Contribution: 0.5%
Washington & Lee Law School professor Timothy Jost predicted that “insurers in the individual market will benefit substantially from reinsurance payments” and will be “spared some administrative costs-notably the cost of underwriting which should be quite substantial.” ” The cost of new benefits should not be a big deal,” he continued, since “most of the costs of health insurance are for inpatient, outpatient, physician, lab, radiology, and pharmaceuticals, which virtually all insurers now cover.”
“I suspect that what is going on is a combination of legitimate concern about new costs, overestimation of what those costs will be and underestimation of offsetting savings, taking a chance to attack the ACA, and grabbing the opportunity to make some profit,” Jost added.
The Affordable Care Act reforms the individual health care market and allows businesses and individuals to take advantage of large risk pools by purchasing coverage through state-based health care exchanges. Over time, insurers will see an influx of new customers, many of whom will benefit from the law’s tax credits and will see their health care bills decrease.
In the short term, however, regulators must remain vigilant. As Sarah Lueck, of the Center for Budget and Policy Priorities (CBPP), told ThinkProgress, “The question of whether these increases are justified is something that regulators should closely scrutinize.”