The Washington Post by N.C. Aizenman –
February 15, 2013:
Many young, healthy Americans could soon see a jump in their health insurance costs, and insurance companies are saying: It’s not our fault.
The nation’s insurers are engaged in an all-out, last-ditch effort to shield themselves from blame for what they predict will be rate increases on policies they must unveil this spring to comply with President Obama’s health-care law.
Insurers point to several reasons that premiums will rise. They will soon be required to offer more-comprehensive coverage than many currently provide. Also, their costs will increase because they will be barred from rejecting the sick, and they will no longer be allowed to charge older customers sharply higher premiums than younger ones.
Supporters of the law counter that concerns about price hikes are overstated, partly because federal subsidies will cushion the blow.
The insurers’ public relations blitz is being propelled by a growing cast of executives, lobbyists, conservative activists and state health officials. They increasingly use the same catchphrase — “rate shock” — to warn about the potential for price surges.
Aetna chief executive Mark T. Bertolini invoked the term at his company’s recent annual investor conference, cautioning that premiums for plans sold to individuals could rise as much as 50 percent on average and could more than double for particular groups such as the young and healthy.
The danger of rate shock has also become the favored weapon of conservative opponents of the law, repeated in a drumbeat of op-eds and policy papers in recent weeks.
The argument is a powerful one because the success of the law, which was the signature domestic accomplishment of Obama’s first term, depends on enough people signing up for insurance, particularly healthy people. The issue is surfacing as the most recent significant challenge in implementing the health-care overhaul.
Supporters of the law complain that the warnings amount to a smear attack by special interests and political partisans, akin to earlier claims that the law would allow bureaucrats to deny life-saving care to save money.
“ ‘Rate shock’ is the new ‘death panels,’ ” said Wendell Potter, a former head of communications for the health insurer Cigna who is now a critic of the industry. “They’ve chosen these words very carefully to scare people. It’s the ideal term for what is, at its core, a fear-based campaign.”
Yet even analysts who favor the law concede that it will result in higher costs for some young, healthy people.
Most of the new rules that could push up premiums will not apply to plans sponsored by large employers, only to those sold to individuals and small businesses. These policies will be available on insurance marketplaces, or “exchanges,” that the law sets up in each state beginning in 2014, and that are ultimately expected to serve about 26 million people.
The law will require insurers to offer a generous package of benefits for exchange plans, including coverage of maternity care, prescription drugs and treatment for mental illness. It also caps customers’ out-of-pocket expenses.
Many 20-somethings who buy their own insurance have plans that are considerably skimpier. So, under the new rule, they will be getting and paying for more, whether they want the added coverage or not.
Another key driver of higher prices: Insurers will no longer be able to turn away or charge more to people with preexisting conditions. Perhaps most significantly, insurers will be allowed to charge their oldest customers only three times as much as their youngest. In most states, older customers are paying at least five times as much.
The result: Older, sicker people will pay lower premiums. Younger, healthier people will pay higher ones to make up the difference. The price of a policy for a young, healthy man in, for instance, Milwaukee, could triple from $58 per month to $175, according to a survey of insurers released by Douglas Holtz-Eakin, president of the American Action Forum, a center-right think tank, and a former director of the Congressional Budget Office.
Insurers argue that such increases could prompt many healthy young adults to opt out of coverage, skewing the insurance market so heavily toward the old and sick that it implodes.
The trade group America’s Health Insurance Plans, or AHIP, is lobbying for the delay or suspension of some of the stricter standards that could increase rates.
“We want the system to be affordable because we want people to participate,” said AHIP’s president and chief executive, Karen Ignagni.
Supporters of the law note that it will provide many people with income-based federal subsidies to help buy insurance and say that this will more than offset the impact of the higher rates.
In four of five states he studied, more people will end up saving money than losing it, said Jonathan Gruber, an economist and key adviser to Obama during the debate over the health-care law. “The typical case I’m looking at is that roughly two-thirds of people are better off, once you factor in the tax subsidies, and one-third of them are worse off,” he said.
“You’re only worse off if you’re young and not poor. And ‘worse off’ isn’t even the right word to use, because you’re still getting more generous insurance than you were before.”
Larry Levitt, an expert on insurance with the Kaiser Family Foundation, supports that view. As a result of the subsidies, he said, 80 percent of all people — and over half of those under 30 — will pay less out of their own pocket for one of the fairly generous “Silver” plans sold on the exchanges than they would for an equivalent plan today.
But many 20-somethings today buy stripped-down insurance, and that changes the picture. Eighty percent would spend more on exchange policies in 2014 than they do on their current, often bare-bones, plans, even when subsidies are taken into account, according to the New York-based consulting firm Oliver Wyman, which does work for AHIP.
If these young and healthy people find the pinch to their wallets too painful, they could either go without insurance and pay a tax penalty or take advantage of a provision in the law that allows those younger than 30 to buy a high-deductible “catastrophic” plan that will presumably be cheaper.
Gruber doubts that either option will prove popular. The $1,600 or $2,000 annual price tag many will be facing on the exchanges is still an appealing deal, he said — especially in light of the nearly $700 minimum penalty they will have to pay for failing to get insurance by 2016.
Insurance executives are less sanguine that young people will buy insurance. They note that the penalty for not having coverage will be as low as $95 for many people in 2014.
They are pressing the administration to issue regulations that would bolster people’s incentives to get insurance — for example, allowing plans to charge higher rates to people who don’t sign up right away.
The insurers also want the administration to delay the rule that limits premiums for older customers, to allow customers with existing policies that don’t meet the law’s standards to keep them longer, and to repeal an excise tax that the law imposes on insurance companies, which they say will boost premiums only higher.
“We’re very concerned about this,” said Alissa Fox, a senior vice president at the Blue Cross Blue Shield Association, which represents 38 independent insurers.
Obama officials have declined to say whether they have the authority or inclination to grant the industry’s requests. And time is running short. Although the exchanges won’t officially open until Jan. 1, enrollment begins Oct. 1. Industry sources say premiums for the exchange plans will need to be set as soon as March and probably no later than July or August.
Some insurance executives say privately that they don’t have high expectations of winning concessions in the next couple of weeks but they hope their public messaging around “rate shock” will at least head off what they fear could be a frenzy of insurer-bashing once premiums are announced this spring.
“Let’s face it,” said an executive at one company. “We’re not exactly everybody’s favorite industry.”