Individual Health Premiums to Shoot Up Under Affordable Care Act Source: WSJ – Merrill Matthews

February 2, 2013 by

Individual Health Premiums to Shoot Up Under Affordable Care Act Source: WSJ – Merrill Matthews , January 2013

Health insurance premiums have been rising-and consumers will experience another series of price shocks later this year when some see their premiums skyrocket thanks to the Affordable Care Act, aka ObamaCare. The reason: The congressional Democrats who crafted the legislation ignored virtually every actuarial principle governing rational insurance pricing. Premiums will soon reflect that disregard-indeed, premiums are already reflecting it. Central to ObamaCare are requirements that health insurers (1) accept everyone who applies (guaranteed issue), (2) cannot charge more based on serious medical conditions (modified community rating), and (3) include numerous coverage mandates that force insurance to pay for many often uncovered medical conditions. Guaranteed issue incentivizes people to forgo buying a policy until they get sick and need coverage (and then drop the policy after they get well).

While ObamaCare imposes a financial penalty-or is it a tax?-to discourage people from gaming the system, it is too low to be a real disincentive. The result will be insurance pools that are smaller and sicker, and therefore more expensive. How do we know these requirements will have such a negative impact on premiums? Eight states-New Jersey, New York, Maine, New Hampshire, Washington, Kentucky, Vermont and Massachusetts-enacted guaranteed issue and community rating in the mid-1990s and wrecked their individual (i.e., non-group) health-insurance markets. Premiums increased so much that Kentucky largely repealed its law in 2000 and some of the other states eventually modified their community-rating provisions.

States won’t experience equal increases in their premiums under ObamaCare. Ironically, citizens in states that have acted responsibly over the years by adhering to standard actuarial principles and limiting the (often politically motivated) mandates will see the biggest increases, because their premiums have typically been the lowest. Many actuaries, such as those in the international consulting firm Oliver Wyman, are now predicting an average increase of roughly 50% in premiums for some in the individual market for the same coverage. But that is an average. Large employer groups will be less affected, at least initially, because the law grandfathers in employers that self-insure. Small employers will likely see a significant increase, though not as large as the individual market, which will be the hardest hit. We compared the average premiums in states that already have ObamaCare-like provisions in their laws and found that consumers in New Jersey, New York and Vermont already pay well over twice what citizens in many other states pay. Consumers in Maine and Massachusetts aren’t far behind. Those states will likely see a small increase. By contrast, Arizona, Arkansas, Georgia, Idaho, Iowa, Kentucky, Missouri, Ohio, Oklahoma, Tennessee, Utah, Wyoming and Virginia will likely see the largest increases-somewhere between 65% and 100%. Another 18 states, including Texas and Michigan, could see their rates rise between 35% and 65%.

While ObamaCare won’t take full effect until 2014, health-insurance premiums in the individual market are already rising, and not just because of routine increases in medical costs. Insurers are adjusting premiums now in anticipation of the guaranteed-issue and community-rating mandates starting next year. There are newly imposed mandates, such as the coverage for children up to age 26, and what qualifies as coverage is much more comprehensive and expensive. Consolidation in the hospital system has been accelerated by ObamaCare and its push for Accountable Care Organizations. This means insurers must negotiate in a less competitive hospital market. Although President Obama repeatedly claimed that health-insurance premiums for a family would be $2,500 lower by the end of his first term, they are actually about $3,000 higher-a spread of about $5,500 per family.

Health insurers have been understandably reluctant to discuss the coming price hikes that are driven by the Affordable Care Act. Mark Bertolini, CEO of Aetna, the country’s third-largest health insurer, broke the silence on Dec. 12. “We’re going to see some markets go up by as much as 100%,” he told the company’s annual investor conference in New York City. Insurers know that the Obama administration will denounce the premium increases as the result of greedy health insurers, greedy doctors, greedy somebody. The Department of Health and Human Services will likely begin to threaten, arm-twist or investigate health insurers in an effort to force them into keeping their premiums more in line with Democratic promises-just as HHS bureaucrats have already started doing when insurers want premium increases larger than 10%. And that may work for a while. It certainly has in Massachusetts, where politicians, including then-Gov. Mitt Romney, made all the same cost-lowering promises about the state’s 2006 prequel to ObamaCare that have yet to come true. But unlike the federal government, health insurers can’t run perpetual deficits. Something will have to give, which will likely open the door to making health insurance a public utility completely regulated by the government, or the left’s real goal: a single-payer system.

Filed Under: Health Care Reform, Health Insurance Tagged With:

Here’s a List of Tax Hikes & Fees Coming With Obamacare Next Year!

December 28, 2012 by

Starting in 2014, Barack Obama’s health care law will expand coverage to some 30 million uninsured people. At the same time, insurers no longer will be allowed to turn away those in poor health, and virtually every American will be required to have health insurance — or pay a fine. Insurance will be available through an employer or a government program or by buying it on their own.

Here’s a look at some of the major taxes and fees, estimated to total nearly $700 billion over 10 years.

– Upper-income households. Starting Jan. 1, individuals making more than $200,000 per year, and couples making more than $250,000 will face a 0.9 percent Medicare tax increase on wages above those threshold amounts. They’ll also face an additional 3.8 percent tax on investment income. Together these are the biggest tax increase in the health care law.

– Employer penalties. Starting in 2014, companies with 50 or more employees that do not offer coverage will face penalties if at least one of their employees receives government-subsidized coverage. The penalty is $2,000 per employee, but a company’s first 30 workers don’t count toward the total.

– Health care industries. Insurers, drug companies and medical device manufacturers face new fees and taxes. Companies that make medical equipment sold chiefly through doctors and hospitals, such as pacemakers, artificial hips and coronary stents, will pay a 2.3 percent excise tax on their sales, expected to total $1.7 billion in its first year, 2013. They’re trying to get it repealed.

The insurance industry faces an annual fee that starts at $8 billion in its first year, 2014.

Pharmaceutical companies that make or import brand-name drugs are already paying fees; they totaled $2.5 billion in 2011, their first year.

– People who don’t get health insurance. Nearly 6 million people who don’t get health insurance will face tax penalties starting in 2014. The fines are estimated to raise $6.9 billion in 2016. Average penalty in that year: about $1,200.

– Indoor tanning devotees. The 10 percent sales tax on indoor tanning sessions took effect in 2010. It’s expected to raise $1.5 billion over 10 years.

The 28 million people who visit tanning booths and beds each year — most of them are women under 30, according to the Journal of the American Academy of Dermatology — are already paying.

Filed Under: Health Care Reform Tagged With: ,

Health Care Reform

November 16, 2012 by

Health Care Reform

Penalty 101: Arguably, the most critical component of the Affordable Care Act, the individual mandate requires every American to either carry health insurance or face a fine.  Last month, a Congressional Budget Office analysis estimated that 11-12 million uninsured Americans would be subject to the individual mandate, with more than half expected to pay the fine rather than obtain coverage.  What that means is that, beginning in 2014, many consumers who can afford health insurance but elect to go without, must pay penalties to the IRS when they file their taxes the following year.  And, while these penalties start off small, they ramp up to their full levels by 2016.  But, due to the inherent confusion accompanying full implementation, it is believed that more people than previously estimated may face the penalty.

 

Filed Under: Health Care Reform, Health Insurance Tagged With: , ,
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