Provision of Obamacare fuels sticker shock
When setting premiums for 2014, insurers baked in bigger-than-usual adjustments, driven in large part by a game-changing rule: They can no longer reject people with medical problems.
Popular in consumer polls, the provision in the health law transforms the market for the estimated 14 million Americans who buy their own policies because they don’t get coverage through their jobs, according to Kaiser Health News. Barred from denying coverage, insurers also can’t demand higher rates from unhealthy people and those deemed high risks because of conditions including obesity, high blood pressure, or a previous cancer diagnosis.
But the provision also adds costs. To a larger degree than other requirements of the law, it is fueling the "sticker shock" now being voiced by some consumers about premiums for new policies, say industry experts.
In setting the 2014 rates, insurers must factor in "assumptions about who will sign up: high users or healthy people," said David Axene, a fellow of the Society of Actuaries. "You can imagine who most of the health plans thought would be predominantly signing up."
Regulatory filings and comments from insurers show they expect that accepting the sick as well as the healthy could raise their claims costs 5% to 50% or more this year. That "would be the largest single factor" at Blue Shield of California, accounting for about a 20% increase in expected claims costs, said Mike Beuoy, director, actuarial services.
The focus on premiums heightened in November amid news reports about large numbers of individual policyholders nationwide who are learning that their current plans are being discontinued and they must choose a new policy.
To be sure, there are other factors affecting premium cost changes. For one, the law requires insurers include 10 benefits deemed essential by the law, including hospitalization, drugs, maternity care, and mental health services, benefits not all plans sold to individuals currently include. Indeed, this change is one of the major reasons insurers cite for discontinuing policies. Another provision caps consumers’ annual out-of-pocket costs to no more than $6,350 for individuals or $12,700 for families, which could add to premiums as well.
Insurers must also charge men and women equally, and they are limited to charging older Americans no more than three times what younger policyholders are charged, which is considerably less than they could before in many states.
Altogether, those changes for some consumers might mean a sharp increase in premiums between their soon-to-be discontinued policies and new ones being offered them by insurers, even for similar plans.
Still, despite the factors that can drive up premiums, including medical inflation, not all consumers will see higher prices. The health law rules mean people who are older and sicker might see a drop from what they’re paying now. And about half of consumers who currently buy their own policies will be eligible for a subsidy to help offset the premium cost, according to a study released in August.
BlueCross BlueShield of Illinois spokeswoman Lauren Perlstein said that the health law will "expand access to health care coverage for millions and may offer additional benefits for many [and] the impact on premiums may vary widely."
The changes make the so-called individual market more comparable with the way insurers price and offer coverage to employers, where rules have long been in place barring them from rejecting employees with health conditions. Employer coverage also generally covered more benefits with lower deductibles and fewer restrictions than policies purchased by individuals, who sometimes did not realize the limits of their coverage.
Michael Lujan, a health benefits consultant and former director of sales and marketing for Covered California, the state’s new online marketplace, said, "We as consumers may not know just how lacking our current policies are because it seemed like a good value and we didn’t use it much."
The less their policies covered previously, the more consumers’ premiums are likely to rise, experts say. Georgetown University research professor Sabrina Corlette said that while adding some benefits only costs "pennies on the dollar," others are more expensive. A Maryland Health Care Commission report from 2012, for example, said the state’s requirement that insurers include maternity coverage added about 4% to the cost of a premium.
