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News // February 6, 2013 MAAC Staff

Will Health Insurance Premiums Get More Expensive?

The last post described panic over the cost of health insurance. If you get your heath insurance through an employer or Medicare, you may not realize that most of the cost of your policy is picked up by someone else, either your employer or taxpayers. Believe it or not, in 2012 the average cost of an employee benefit health insurance policy for a family of four approached $16,000 a year.

A few weeks ago, Aetna CEO Mark Bertolini caused a stir when he said “Obamacare” would push the cost of health insurance even higher. “In some markets,” he said, premium increases could “go as high as 100 percent. And we’ve done all that math. We’ve shared it with all the regulators. We’ve shared it with all the people in Washington that need to see it. And I think it’s a big concern.”

Writing for Forbes, Rick Ungar says Bertolini based his prediction on three factors: First, a new tax is being placed on health insurance company sales. Second, Obamacare limits insurance rating, meaning the insurance companies can no longer charge a 50-year-old as much as ten times more in premiums than a 20-year-old, just because of age. And third, insurance offered on the insurance exchanges must contain a minimum standards of benefits.

Let’s look at these one at a time. First item: The sales tax would amount to 1.9 percent to 2.3 percent of premiums in 2014, going up to 2.8 percent to 3.7 percent by 2023. Not exactly ruinous, however much the insurance industry might object.

Now, on to the second item. Beginning next year, insurers selling personal or small group policies must use an adjusted community rating system, or ACR, to set the cost of policies. This means the cost of the insurance must be spread out equally among a community, which would be the area in which that insurance is offered. Within the community, a healthy 55-year-old nonsmoker and a 55-year-old nonsmoker with mesothelioma would pay the same amount for their premiums.

Policy prices may be adjusted depending on family size, where the individual lives, and whether he or she smokes. Insurers may also adjust policy prices for age, but within limits. Right now, in some states older policy holders pay as much as ten times more than younger ones, just because of age. Beginning next year, the oldest policy holder cannot be charged more than three times what the youngest one pays for premiums.

The insurance industry has flooded the nations op-ed pages with warnings that insurance premiums for some younger people will go up. Yes, but by the same token, insurance premiums for some older people will go down.

Now for the third item — this applies to insurance purchased on the exchanges, which is estimated to be fewer than 9 percent of all policies. Most of us will still get our insurance through employers, or from a program like Medicare or Medicaid. Many states already regulate what minimum coverage a health insurance policy must provide. However, some do not, and in those states insurers have been making a tidy profit selling policies with big holes in coverage — for example, “obstetric benefits” that don’t pay for the mother’s hospital costs, leaving the new parents with a five-figure bill to pay. Yes, that happens.

The Congressional Budget Offices continues to estimate that the cost of larger group policies won’t be much affected by the new law, and that the cost of small group and individual policies will be affected only slightly. Next year, we will see who is right.