Health Care Reform Sticker Shock

As predicted, many insurers are set to raise premiums for health insurance policies as the Affordable Care Act (ACA) comes fully online next year. The high prices will be out of reach for many of the people the ACA was touted as helping, forcing consumers to choose between paying for budget-busting health insurance or forgoing coverage and paying a penalty.

These increases are not the result of insurance company greed, but rather stem from the mandates in the ACA that inevitably increase health care plan costs, including guaranteed issue (the requirement that insurers cover everyone who applies for coverage), community rating (which requires insurers to provide policies at the same price to all people regardless of how sick they may be), and the requirement that health plans must include coverage of specific services and other benefits.

It’s a basic fact of health care that sick people use more services and benefits. And with more people poised to gain insurance and enter the health care market, someone has to pay for all of this coverage.

Kaiser Health News (KHN) recently reported that the largest insurer in Maryland (CareFirst BlueCross BlueShield) has proposed premiums for new individual health plans that are 25% higher on average than current offerings. The proposed premiums are for plans that will be sold through the state’s online health insurance exchange under the ACA. Premiums for the small group plans CareFirst will offer through the exchange are expected to increase by about 15%.

Insurance experts and others have repeatedly raised concerns that insurance plans offered on the exchanges will be too expensive for many people to buy because, according to KHN, “guaranteeing coverage at regulated prices for sick people would drive up the cost of insurance in the individual market.” CareFirst CEO Chet Burrell told KHN that prices could rise as much as 150% for some demographics.

Other insurers in Maryland are also anticipating similar premium increases. KHN reported that a spokesman for Aetna said proposed premiums for Maryland small group plans would likely increase 12% to 16% next year. United has proposed average small group increases of 15% to 28%.

These increases figure to be repeated nationwide. A report titled “Cost of the Future Newly Insured under the Affordable Care Act (ACA),” released by the Society of Actuaries, estimated that the cost of medical claims per person (which is what drives the cost of health insurance premiums) will increase by an average of 32% nationally under the ACA.

While federal income-based insurance subsidies may mitigate the increased cost of insurance to some extent for some groups of people, others will feel the effects most acutely (for example, those whose income is above 250% of the poverty level — they will receive some subsidies to help pay for premiums but not out-of-pocket costs).

So, the ACA will lead to higher costs for businesses and consumers, and increased uncertainty from year to year as to what those costs will actually be. Residents in states that have less control over how much insurers can raise premiums will likely have to pay more for their coverage. Rising premiums for plans offered through the insurance exchanges will lead many people to pay the penalty and remain uninsured. Tell me again what this “reform” is supposed to fix?

The ACA is poised to fail on its central promise of providing affordable health insurance to millions of uninsured Americans and expanding access to health care. By mandating that all applicants must receive coverage, and restricting companies from charging higher prices to people who use more resources and services, the ACA will raise insurance costs for millions of Americans.