BEYOND THE NUMBERS
As we recently noted, claims of “rate shock” from health reform’s changes to the health insurance markets are overblown. But a new report has generated considerable attention to this issue again, with health reform critics claiming that it’s the latest evidence that people will have to pay much more for their coverage.
The study, sponsored by the Society of Actuaries (SOA) and authored by the Lewin Group and Optum Inc., had this headline number: it will cost insurers nationwide an estimated 32 percent more to cover enrollees in the individual insurance market.
That’s not a 32 percent increase in the premiums that consumers in the individual market will pay. It’s an estimate of the overall increase in costs that insurers will pay due to factors such as some higher-cost uninsured people entering the market.
The report did not factor in several elements of health reform that are expected to cut consumers’ premiums. Most importantly, it did not account for health reform’s premium tax credits that will significantly reduce what many people will pay for coverage in the individual insurance market through the new health insurance exchanges. It also did not include the impact of so-called risk-mitigation programs, such as risk adjustment and reinsurance, which will help to protect insurers that take on higher-cost enrollees or face unexpectedly high costs and, in turn, help keep premiums stable.
In fact, the actuarial firm Milliman issued a report for California’s exchange at about the same time as the SOA study. The Milliman report estimated the overall effects of various aspects of health reform on the premiums that consumers will pay in the state’s individual insurance market, with promising results. It noted that a “significant portion” of people in the individual market will be eligible for premium credits and found that after taking the premium credits into account, single people with incomes less than 250 percent of the federal poverty level (or about $29,000 a year) will pay an average of 84 percent less for their premiums. Individuals with slightly higher incomes, between about $29,000 and $46,000 a year, can expect the cost of their premiums to fall an average of 47 percent.
The Milliman report found that higher-income people not receiving subsidies could pay more, on average, for their premiums, but also noted that currently uninsured people will pay less in premiums on average in 2014 than they would for coverage today.