On Tuesday, the Associated Press (AP) published an article recounting a Society of Actuaries (SOA) study that finds health insurance premiums “will jump an average 32 percent for Americans’ individual policies under President Obama’s overhaul.” That titillating claim formed the basis of multiple news agencies’ headlines Wednesday morning, including NBC News, Fox News, and U.S. News and World. But as several other analyses show — and the report’s own authors admit — these assertions are based on an extremely narrow interpretation of the health care law that assumes rising costs in perpetuity while ignoring its very real cost-cutting measures.
In essence, SOA argues that Obamacare provisions extending health coverage to all Americans regardless of their pre-existing medical conditions will dramatically raise costs in the individual insurance market — especially since sicker, older Americans will have guaranteed access to insurance and cannot be charged more than three times the premiums of younger people. The Society’s projections are quite dramatic, finding that premium rate increases by 2017 “would be 62 percent for California, about 80 percent for Ohio, more than 20 percent for Florida and 67 percent for Maryland.”
Corporate insurance giants have used many of these same arguments to dishonestly justify double-digit rate hikes on their customers, despite soaring profits. But these claims are founded on a baseline that assumes current health care cost trends to be set in stone, and ignore — even by the SOA’s own admission — almost all of Obamacare’s most important consumer protections and market regulations aimed at lowering overall costs. Rick Foster, a retired Medicare actuary, admitted that, although the study’s projections are consistent with certain health care trends, they don’t necessarily reflect the bigger picture:
“Having said that,” Foster added, “actuaries tend to be financially conservative, so the various assumptions might be more inclined to consider what might go wrong than to anticipate that everything will work beautifully.” Actuaries use statistics and economic theory to make long-range cost projections for insurance and pension programs sponsored by businesses and government. [...]
Kristi Bohn, an actuary who worked on the study, acknowledged it did not attempt to estimate the effect of subsidies, insurer competition and other factors that could mitigate cost increases. She said the goal was to look at the underlying cost of medical care.
In fact, more comprehensive studies of the health reform law that incorporate all of its provisions — rather than just the potentially negative ones — have found that “[m]ost young adults and families will be largely shielded from the full effects of the narrower age rating bands thanks to the ACA’s increased eligibility for Medicaid and tax credits offered through state health insurance exchanges or through access to employer-sponsored insurance,” and that Americans between the ages of 21 and 27 purchasing insurance through the individual market “will be protected by Medicaid/CHIP or exchange-based subsidies under reform.”
That’s what led Larry Levitt, an insurance expert with the nonpartisan Kaiser Family Foundation, to find the SOA’s report to be useless barring more targeted analysis. “I’d generally characterize it as providing useful background information, but I don’t think it’s complete enough to be treated as a projection,” Levitt said.