Study: Health Overhaul To Raise Claims Cost 32 Percent MUST READ!

Study: Health overhaul to raise claims cost 32 percent

Individual policies to become more expensive as sicker people join pool

In this March 23, 2010 file photo, Marcelas Owens of Seattle, left, Rep. John Dingell, D-Mich., right, and others, look on as President Barack Obama signs the health care bill in the East Room of the White House in Washington. Medical claims costs _ the biggest driver of health insurance premiums _ will jump an average 32 percent for individual policies under President Barack Obama’s overhaul, according to a study by the nation’s leading group of financial risk analysts. Recently released to its members, the report from the Society of Actuaries could turn into a big headache for the Obama administration at a time when many parts of the country remain skeptical about the Affordable Care Act. (AP Photo/J. Scott Applewhite, File) / AP

WASHINGTON — Medical claims costs — the biggest driver of health insurance premiums — will jump an average of 32 percent for Americans’ individual policies under President Barack Obama’s overhaul, according to a study by the nation’s leading group of financial risk analysts.

The estimates were recently released by the Society of Actuaries to its members.

While some states will see medical claims costs per person decline, the report concluded the overwhelming majority will see double-digit increases in their individual health insurance markets, where people purchase coverage directly from insurers.

The disparities are striking. By 2017, the estimated increase would be 62 percent for California, about 80 percent for Ohio, more than 20 percent for Florida and 67 percent for Maryland. Much of the reason for the higher claims costs is that sicker people are expected to join the pool, the report said.

Not employer plans

Also, states have different populations and insurance rules. In the relatively small number of states where insurers were already restricted from charging higher rates to older, sicker people, the cost effect is less.

The report did not make similar estimates for employer plans, the mainstay for workers and their families. That’s because the primary effect of the Affordable Care Act is on people who don’t have coverage through their jobs.

The Obama administration questions the design of the study, saying it focused only on one piece of the puzzle and ignored cost relief strategies in the law such as tax credits to help people afford premiums and special payments to insurers who attract an outsize share of the sick. The study also doesn’t take into account the potential price-cutting effect of competition in new state insurance markets that will go live Oct. 1, administration officials said.

But a prominent national expert, recently retired Medicare chief actuary Rick Foster, said the report does “a credible job” of estimating potential enrollment and costs under the law, “without trying to tilt the answers in any particular direction.”

“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.”
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.

Good news, caveats

On the plus side, the report found the law will cover more than 32 million currently uninsured Americans when fully phased in. And some states — including New York and Massachusetts — will see double-digit declines in costs for claims in the individual market.

Larry Levitt, an insurance expert with the nonpartisan Kaiser Family Foundation, reviewed the report.
“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,” he said, adding that the conclusion that employers with sicker workers would drop coverage is “speculative.”

Another caveat: The Society of Actuaries contracted Optum, a subsidiary of UnitedHealth Group, to do the number-crunching that drives the report. United also owns the nation’s largest health insurance company. Bohn said the study reflects the professional conclusions of the society, not Optum or its parent company.

Original Article: http://www.fdlreporter.com/viewart/20130327/SHE0101/303270299/Study-Health-overhaul-raise-claims-cost-32-percent