Health care reform may increase cost of insurance

WASHINGTON – Less than a year before Americans will be required to have insurance under President Barack Obama’s health care law, many of its backers are growing increasingly anxious that premiums could jump, driven up by the legislation itself.

Higher premiums could undermine a core promise of the Affordable Care Act: to make basic health protections available to all Americans for the first time. Major rate increases also threaten to cause a backlash just as the law is supposed to deliver many key benefits Obama promised when he signed it in 2010.

“The single biggest issue we face now is affordability,” said Jill Zorn, senior program officer at the Universal Health Care Foundation of Connecticut, a consumer advocacy group that championed the new law.

Administration officials have consistently downplayed the specter of rate increases and other disruptions as millions of Americans move into overhauled insurance markets in 2014. They cite provisions in the law that they say will hold down premiums, including new competitive markets they believe will make insurers offer competitive rates.

Exactly how high the premiums may go won’t be known until later this year. But already, officials in states that support the law have sounded warnings that some people – mostly those who are young and do not receive coverage through their work – may see considerably higher prices than expected.

That is because of new requirements in the law aimed at making insurance more comprehensive and more affordable for older, sicker consumers.

Insurance regulators in California, which has enthusiastically embraced the law, cautioned the Obama administration in a recent letter about “rate and market disruption.”

Oregon’s insurance commissioner, another supporter of the law, said new regulations could push up premiums for young customers by as much as 30 percent next year. He urged administration officials to slow enactment of the new rules.

A leading advocate for consumers in their 20s, Young Invincibles, sounded a similar caution, suggesting in a letter to administration officials that additional steps may be needed to protect young people from rising premiums. Young Invincibles mobilized in 2010 to help pass the health care law.

And regulators in Massachusetts, which was the model for Obama’s law, recently warned that although many residents and small businesses in the state “will see premium decreases next year, a significant number will see extreme premium increases.”

The law does include many new protections for consumers. Even those now sounding alarms emphasize the importance of those provisions, including guaranteed coverage for Americans with pre-existing medical conditions.

“For most people, this will be a dramatic improvement,” Zorn said.

The new law also is designed to make insurance more affordable for many consumers. Millions of Americans who make less than four times the federal poverty level – or about $92,000 for a family of four – will qualify for federal subsidies to offset the cost of their premiums if they don’t get insurance through employers.

But these new protections and benefits – largely intended for Americans who do not get health coverage through their employers – also threaten to drive up costs.

Next year, there will be new limits on how much insurers can charge older consumers. Insurers will be banned from charging more to women or people with illnesses.

The industry will have to offer plans that cover a new basic set of benefits, including prescription drugs, mental health, pediatric dental care and other services. And insurers will be prohibited from placing annual or lifetime limits on coverage.

The nonpartisan Congressional Budget Office estimates that insurance premiums for those who buy coverage on their own probably will be 10 percent to 13 percent higher in 2016, in large part because health plans will be much more comprehensive. Many consumers will probably pay less, however, because of the subsidies available in the law.

The health care law also includes a new tax and new fees on insurance companies that the industry says it will pass on to consumers.

The provision that will prevent insurance companies from charging older consumers more than three times what they charge young consumers has generated particular concern among regulators. In many states, insurers now can charge five times as much or more to people in their 50s and 60s.

The requirement was a top priority of the influential AARP.

It is designed to make insurance more affordable to a group that often most needs insurance. But as rates come down for older people, they may increase for consumers in their 20s, regulators worry.