There’s been much discussion of the impact of the health reform bill – the NFIB and GOP Presidential candidates claiming the ACA has already caused insurance premiums to climb, while others are deriding President Obama for his statements that ACA would reduce premiums.
What’s true, and what’s BS?
One way to separate the fertilizer from the poop is to turn to independent sources, such as FactCheck. Another is to go back and see what the President actually said reform would do.
First, FactCheck. In their view, “The [health reform] law has caused only about a 1 percent to 3 percent increase in premiums, according to several independent experts.”
That finding is consistent with reports from other sources, and is based on the changes already in place due to ACA – no upper monetary limits on benefits, covering children to age 26 with no pre-ex exclusions, and no cost preventive care. There’s lots of sources in the link above that verify the 1 – 3 percent figure, including former Bush appointee Gail Wilensky.
Now on to President Obama’s blown promise that reform would reduce premiums. Let’s see what he actually said:
“On Monday I met with representatives of the insurance and the drug companies, doctors and hospitals, and labor unions, groups that included some of the strongest critics of past comprehensive reform proposals. We discussed how they’re pledging to do their part to reduce our nation’s health care spending by 1.5 percent per year. Coupled with comprehensive reform, this could result in our nation saving over $2 trillion over the next 10 years, and that could save families $2,500 in the coming years — $2,500 per family.”
I’d note that the President was making two points;
1) reform and cost reductions from stakeholders would reduce spending by 1.5 percent. Not reform alone.
2) this statement indicates the cost reduction, when spread across every American family, would equate to a reduction of $2500 per family over ten years.
Obama did NOT say that family premiums would drop by $2500 per year, and in his other statements, the President made it clear reform would reduce the RATE OF INCREASE by 1.5 points, not total spending.
That said, it is still premature for any conclusions re the impact of reform on health care premiums, other than the one noted above – initial, already-implemented measures have increased premiums by 1 – 3 percent.
That still doesn’t address why premiums went up nine percent. And I’d argue that the data indicates the differential has much more to do with insurers’ desire to generate margin than any real increase in underlying costs.
Oct
25
I suspect the carriers would dispute your argument by inundating us with a whole lot of reasons – not necessarily actual data – to support their “margin” increases. I am certain that I’ve heard that same line from the carriers over the past 25 to 30 years and we will continue to hear it as long as they believe that they are not obligated to take on “risk” as defined by the IRC.
I don’t think it’s “ObamaCare” either. I’m not sure what gives with the data you cite showing medical costs being flat, there is unbiased conflicting data on that. For your hypothesis that the blame falls on the carriers increasing their margin, how do you suppose they’re getting around the MLR? I would say we need a logical explanation for that first, because that’s a pretty important variable.
My hypothesis is that it’s increased spending and utilization and the conflicting data backs it up.
inundating us with a whole lot of reasons – not necessarily actual data – to support their “margin” increases.
There isn’t data to provide until the year is over. Rates are charged prospectivly for risk yet to incur. 26 year olds were not eligible before, until you have a year of data to show the effect your just making educated guesses. Once the risk is incurred you can’t go back and change your rates. They need to safely estimate these new liabilities.
Initially it will show up as increased margins until the claims catch up to the premium. There will also be slow but drastic changes in utilization patterns. Hospitals couldn’t spend $10,000,000 on one person before, give them a year or two and I’ll guarantee you they will figure out how though.
Look at financial statements, if you see a jump in underwriting profit, as a percent not $, then they padded numbers. Make sure your looking at health only not their life, annuity, P&C etc
Nate.
I’m surprised at your lack of confidence in insurers’ ability to predict costs and claims for 26 year olds. Having worked for two large insurers, I can assure you that actuaries are pretty skilled at projecting costs for a sub-population with demographics only marginally different than their current covered population.
There is a wealth of data that indicates health care costs and utilization trends moderated dramatically last year, after a decrease in trend in 2009. And these trends were known by plans well before rates were set for 2011; listen to health plans’ quarterly earnings calls if you’d like proof.
I’m also surprised that you are taking the position that favors your suppliers over your customers. Aren’t you supposed to be advocating for employers rather than justifying un-justifiable premium increases that raise your customers’ costs?