Study: Health law to raise claims cost an average 32%

2013-03-27T00:00:00Z Study: Health law to raise claims cost an average 32%The Associated Press The Associated Press
March 27, 2013 12:00 am  • 

WASHINGTON - Insurance companies will have to pay out an average of 32 percent more for medical claims on individual health policies under President Obama's overhaul, the nation's leading group of financial risk analysts has estimated.

That's likely to increase premiums for at least some Americans buying individual plans.

The report by 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.

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. Arizona would see an estimated increase of 22 percent.

Much of the reason for the higher claims costs is that sicker people are expected to join the pool, the report said.

The report did not make similar estimates for employer plans, the mainstay for workers and their families. That's because the primary impact of Obama's law is on people who don't have coverage through their jobs.

The 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 that 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 on Oct. 1, administration officials said.

At a White House briefing on Tuesday, Health and Human Services Secretary Kathleen Sebelius said some of what passes for health insurance today is so skimpy it can't be compared to the comprehensive coverage available under the law.

"Some of these folks have very high catastrophic plans that don't pay for anything unless you get hit by a bus," she said. "They're really mortgage protection, not health insurance."

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."

Actuaries use statistics and economic theory to make long-range cost projections for insurance and pension programs sponsored by businesses and government. The society is headquartered near Chicago.

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.

Uncertainty over costs has been a major issue since the law passed three years ago, and remains so just months before a big push to cover the uninsured gets rolling Oct. 1.

"Some of these folks have very high catastrophic plans that don't pay for an thing unless you get hit by a bus. They're really mortgage protection, not health insurance."

Kathleen Sebelius,

U.S. secretary of health

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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