The threats of premium increases come as the industry is experiencing record profits and are part of a well-coordinated publicity campaign to alarm Americans about the cost of coverage, while downplaying mechanisms in the law that will cushion them from rate shock. The effort comes as insurers seek more favorable regulatory changes that would, in part, allow companies to charge older people more for coverage.
United Health Group Inc., Aetna, and Blue Cross and Blue Shield are ringing the alarm, attributing the possible cost increases to general health care inflation as well as provisions in the health care law, which require insurers to offer more comprehensive coverage, particularly in the individual health care market, and limit the companies’ ability to set premiums based on beneficiaries’ health care histories, age, or sex.
As a result, “The insurance industry has also been talking publicly about big potential premium increases in lobbying for tweaks to the law,” the Wall Street Journal reports:
In a private presentation to brokers late last month, UnitedHealth Group Inc., the nation’s largest carrier, said premiums for some consumers buying their own plans could go up as much as 116%, and small-business rates as much as 25% to 50%. The company said the estimates were driven in part by growing medical costs not directly tied to the law. It also cited the law’s requirements that health status not affect rates and that plans include certain minimum benefits and limits to out-of-pocket charges, among other things. [...]
Aetna Inc. in a presentation last fall to its national broker advisory council, suggested rates on individual plans not being grandfathered under the law could go up 55%, on average, and gave a figure of 29% for small business rates. Both numbers included 10 percentage points tied to medical-cost inflation, not the law. An Aetna spokesman said the numbers are “still generally in line with what we’ve been estimating,” and represented the average impact in a typical state.
An official with Blue Cross & Blue Shield of North Carolina told a gathering of brokers last week that individual premiums could go up by as much as 40% to 50%, according to brokers who were present. A spokeswoman for the insurer said “we don’t have final numbers” yet on premiums.
Insurers have long complained that the law’s more rigorous standards would raise prices, although since the Affordable Care Act was signed into law, national health expenditures have decreased and insurers in the individual market have followed the trend, posting fewer double digit increases. Sudden rate hikes were considered the norm before the law went into effect and applicants were regularly denied coverage or priced out of it altogether. Insurance commissioners have also begun reviewing rates more carefully and insurers have had to spend 80 cents out of every premium dollar on health benefits, rather than administrative overhead.
The ACA also includes mechanisms to help minimize initial sticker shock and independent analyses have found that many young adults can enroll in Medicaid, stay on their parents’ policies, or qualify for tax credits in the state-based health insurance exchanges. The CBO analysis of the law has also determined that average premiums for individuals would be 10 percent to 13 percent higher because of the law — an increase that’s far smaller than insurers are projecting.
Insurers, meanwhile, are already seeing impressive profits. UnitedHealth, for instance, “had a particularly strong past year, with net income of $5.1 billion, up by 11% from the previous year” and Aetna is similarly beating revenue expectations. A July 2010 report from PricewaterhouseCoopers concluded that the law’s state-based health care exchanges provide private insurers with a lucrative new market in which they stand to gain up to $200 billion in revenue by 2019.