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Does Health Reform Cause Premium Increases

By December 23, 2013Commentary

It is clear that contrary to the claims of its proponents, health insurance premiums are going to be higher under the regulatory and structural regime created by the health reform law.  That may be due to a variety of factors, including mandated coverage of more services, removal of some cost-sharing features and restrictions on rating by likely expected use of health services.  A report from the Commonwealth Fund attempts to claim that the reform law is only responsible for a small part of health insurance premium rises for 2012 and 2013, but the analysis is seriously flawed.    (Commonwealth Report)   The authors looked solely at rates for non-grandfathered plans starting from mid-2012 to mid 2013, and only for groups of over 150.  So none of the plans being sold on the exchanges are included and the analysis only covers a time period before the act is fully implemented.  Large group filings, which cover the most people, are not included, and the authors note that the analysis covers at most 5% to 10% of total individual and small group market enrollment.  The reasons for the increases are self-reported, so their accuracy is questionable.  Finally, only rate increases over 10% were examined, but even an increase of 5% is significantly in excess of inflation, and factors for increases over 10% and those under 10% may be different.  The insurers said in their filings that the main factor for rises over 10% was medical cost trend, both utilization and unit price.  In about half the filings, insures said taxes and mandated benefits stemming from the reform law were a factor, but it is hard to see how uniformly imposed taxes and benefit mandates could only effect half the filings.  In the individual market, the average increase was 19% and in the small group one it was 15%.  Insurers who made this limited set of reviewed filings said that medical cost increases were larger than the premium rate increase request for the individual market and that they roughly matched the rate hike in the small group market.  About a fourth to a third of the medical cost increase was due to utilization and about 57% to unit prices.  Although the authors attempt to minimize it, the mandate to provide certain contraceptive services and the new taxes and fees from the law do clearly have an impact on rates, in total up to 5% or more.  The reality, as consumers know, is that the reform law is having a substantial negative effect on what they pay for health care coverage.  The Commonwealth Fund and other apologists only undermine their credibility when they create these misleading analyses that are counter to the obvious.

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