As Americans wait with great anticipation for “affordable” health care come 2014, we hear reports that health care spending remains cool at only a 3.9% increase. On the other hand, there are ongoing reports of premium increases of 10%, 20% or more. State regulators have approved many of these requests as justified (while some states like New York have virtually arbitrarily disallowed most increases and limited them to 4.5% (a very shortsighted strategy that will come back to haunt them, but it plays well in Albany). So what’s going on?
What’s going on is the promise of affordable health care is being undermined by the very law that declared that goal (and promise). The National Association of Insurance Commissioners (NAIC) is a group representing the insurance commissioners in all the states. Commissioners are responsible for regulating insurers and for approving premium increases. And in many states they will be responsible for implementing the health insurance exchanges… but they are concerned.
The following is a bit technical, but clearly the NAIC is worried about premium rate shock in 2014. They are worried about adverse selection where individuals enroll in insurance only when they need it, they are concerned that limiting the additional charge for older, sicker enrollees as the law does will make health insurance unaffordable for younger people and they are worried about all the paperwork and administration caused by the Affordable Care Act.
“State insurance regulators remain concerned about the impact the market reforms will have on premiums, especially for those who are younger and healthier. While subsidies and higher cost-sharing options may be of some assistance, in most states, these populations could have their individual market rates rise considerably in 2014. This potential ‘rate shock’ could, in turn, result in their leaving the marketplace, even with the penalties, which are quite low in the first years.”
“States need as much flexibility as possible under the law to work with issuers to address this problem. States must be able to develop appropriate geographic areas, age bands and curves, rate caps and other tools to benefit all consumers.”
“We are also concerned about the amount of data requested of issuers and the administrative burden and cost that is being placed on them. State regulators work to ensure information collected from issuers is necessary to enforce laws and regulations, and that an undue burden is not placed on them. We encourage federal officials to continue to review the data and other information requested of issuers and work with state insurance regulators to ensure that they do not result in unnecessary costs.”
“We recommend that CMS provide states with the flexibility to phase in the 3:1 age factor ratio over a specific period of time to mitigate the rate shock for this key demographic of the market. With a transition to the required 3:1 age ratio, younger, healthier individuals will experience more gradual rate increases rather than large one-time rate shocks and will be less likely to drop coverage and further destabilize the market.”
“Adverse selection is of great concern to state regulators. In a guaranteed issue, no pre-existing condition environment, the reward for waiting to obtain coverage until it is needed, or switching coverage to minimize cost and maximize benefits will always exist, even with the tax penalties in federal law.”
“There are many tools states use to limit adverse selections, such as, open enrollment periods (which are included in the regulations), waiting periods, penalties for late enrollment, and others.”
“Section 154.215 requires issuers to file all rate increases, regardless of size, with both the state and CMS. State Departments of Insurance will continue to utilize their own data collection templates and formats in order to maintain effective rate review. Therefore, the proposed rule would require issuers to file rates using different templates and formats. This would be an unfair and unnecessary burden, especially to small issuers and new entrants. In states deemed to have an effective rate review program, filing only with the state will provide the necessary degree of regulatory oversight that is the objective of this section.”
Keep in mind that in addition to the above issues, there are the many benefit mandates, fees and taxes that all add to the cost of providing health insurance and which will add to the premiums you pay.
And consider this as well, the idea to raise the Medicare eligibility age to 67 may save the government money for Medicare, but it will raise the premiums for people in the health insurance exchanges. According to a study by the Kaiser Family Foundation:
Raising Medicare’s eligibility to 67 in 2014 would generate an estimated $5.7 billion in net savings to the federal government, but also result in an estimated net increase of $3.7 billion in out-of-pocket costs for 65- and 66-year-olds, and $4.5 billion in employer retiree health-care costs. In addition, the study projects that the change would raise premiums by about 3 percent both for those who remain on Medicare and for those who obtain coverage through health reform’s new insurance exchanges. The study assumes both full implementation of the health reform law and the higher eligibility age in 2014 in order to estimate the full effect of both the law and the policy proposal.