The effect of Obamacare on premiums and Health Insurance
At ihealthcareupdates.com we get many queries and searches regarding what will Obamacare cost, or how the Patient Protection and Affordable Care Act will impact their families financially. This is a very important question for many families and individuals.
Individuals who are currently covered by their employer plans may see little to no change regarding their choice of health insurance provider. The department of Health and Human Services (HHS) recently announced that the health insurance market place, which was planned for Small businesses starting in January 1, 2014 often referred to as SHOP will be pushed off an additional year. This will limit the options individuals who receive health insurance from an employer have.
Now to the heart of the question of what will Obamacare cost?
Essentially the cost of Obamacare is still a mystery to most states and individuals. The only glimpse we have is from the state of Vermont. A few weeks ago Vermont became the first state to provide preliminary numbers to what it will cost to purchase health insurance on the states health insurance market place. The state’s insurance market showed little change from current prices and reassured health law supporters who feared headlines about “sticker shock.” However other states insurance plan costs are still in the air as the deadline for filing proposed insurance plans are not until middle to late May, and even then there are still state process they must go through before the costs can be released to the general public.
If we have to wait until late May to get concrete numbers regarding What Obamacare will cost, and in October we will need to start making decisions regarding health plans, are there other sources we can use to estimate the cost of Obamacare?
A week ago the Society of Actuaries released an analysis predicting future expense based on multiple factors. The Society of Actuaries study was created with the goal of researching the following bulleted topics below.
- What is the anticipated enrollment for the currently uninsured under the ACA?
- For the newly insured, what is their relative morbidity and what could reasonably be expected for relative costs, compared to the currently insured?
- What will be the general impact of the newly insured on the overall post-reform health care industry and insurance market, in terms of supply and demand for healthcare services and insurance carriers?
- How will health care costs for the newly insured differ by state?
- What will be the relative health status and cost for individuals who remain uninsured and how will this vary by state?
- If states expand Medicaid under the ACA, what is the impact on Medicaid costs and enrollment?
The findings related to the cost of health care and the Affordable Care Act are summarized below. If you would like to read the full report from the SOA Click Here to download the full report.
The reason this report is important is because of the source; The Society of Actuaries. The Society of Actuaries (SOA) is a professional organization for actuaries based in North America. It was founded in 1949 as the merger of two major actuarial organizations in the United States: the Actuarial Society of America and the American Institute of Actuaries. This group is known to be non-partisan and has been established for over 60 years.
In regards to what Obamacare will cost the group found: The non-group cost per member per month will increase 32 percent under Affordable Care Act. (Net/Net: If you are not part of a group health insurance plan your monthly premiums will increase by 32%) This increased of costs is made up of several factors. Below are the three most significant factors that will contribute to the 32% increase in premium cost.
a) Obamacare Cost: High risk pool members:
The report indicates the cost of insurance will predominantly increase due to the introduction of “high risk” enrollees moving into an insurance pool. Obamacare prevents insurances plan from denying insurance, and health plans to individuals with pre-existing conditions. Prior to the Affordable Care Act the “high risk” insurance pools generally had few enrollees, the cost per individual were very high. Movement of the high-risk pool individuals into the non-group exchange will generally create a significant increase in cost.
b) Obamacare Cost: Employers dropping group coverage:
The study found that employers with higher cost members are more likely to discontinue coverage; this would allow their workers to obtain coverage on the health insurance marketplace. This also allows these individuals to apply for subsidies if they are eligible.
The figure below from the study shows that employees and dependents that leave employer coverage due to employers discontinuing coverage and employees leaving employer coverage on their own due to the Medicaid expansion are about 30 percent more costly than the group average member ($712 compared to $548).
c) Obamacare Cost: by those currently uninsured who now purchase coverage.
The report estimates spending of health care among the currently uninsured individuals will increase as they start to become part of the insured pool. The reports acknowledges there will be savings through preventative care , and improved primary care services. These cost will be offset by the increase use of other medical services covered under their insurance plan. Overall, the reports estimate an increase in utilization of about 100% if the uninsured becomes insured. The report looks into the pent-up demand that currently exists with individuals who are not currently insured. Once the insurance for these individuals go into effect on January 1, 2014 there is an expectation of high demand and usage of medical services.
The Obama administration and the department of HHS does not fully support the report. The Obama administration questions the setup and design of the SOA study, stating the report focused solely on one of many pieces of the Affordable Care Act and fails to acknowledge the various cost relief strategies established within the Affordable Care Act. There are tax credits and subsidies based on helping individuals afford health care through premiums and special payments to insurers who attract an outsize share of the sick. The administration also states the study doesn’t take into account the effect of competition within the market place, and younger individuals with catastrophic plans “that don’t really pay anything unless you get hit by a bus”, Sebelius said.
What does this mean for consumers and the individual