2013
The Feds are struggling with implementation, the option for small business to use the new insurance exchanges has been delayed, little surprises keep popping up (see the “hidden tax surprise” below) and in addition reality is starting to hit that all the new mandates, changes in underwriting rules for insurers along with continuing growth in health care costs really will cause premiums to rise and in some cases considerably.
The National Association of Insurance Commissioners has released a paper on strategies to mitigate expected premiums next year. As may be expected, their focus is a band aid on the wrong wound.
The problem is not the insurers, the problem is the law.
Nevertheless, the solutions will focus on insurance companies and on merely masking the problem by throwing more money at it. Think of it this way, gasoline goes up in price so the solution is telling you to drive less, buy a new car, the government lowering the road tax or simply telling Exxon to lose money on each gallon.
Here is a brief summary of suggested strategies as reported by the New York Times April 5, 2013:
The options include tighter regulation of premiums, forcing insurers to cut costs or operate at a loss; financial assistance to consumers, in addition to subsidies that will be provided by the federal government; and programs to ensure that the costs of the sickest patients are shared by all insurers.
The paper indicates that state officials have serious concerns about possible rate increases, despite assurances from federal officials who say that insurance will generally be more affordable.
Can you imagine; “forcing insurers to operate at a loss?” The next thing will be complaints about the services provided because insurers cut costs … presumably below the levels already dictated by the law.
Doing the above actually makes things worse because after 2014, premiums that are artificially too low will have to increase to make up the loss. Let’s say the real cost of coverage requires a premium of $100, but regulators say that’s too high so they artificially set it at $90 instead. However, the costs go up 10% the next year and now to cover the real cost, the premium goes to $110 for an increase of more than 20% from the buyers point of view.
For months insurers and consultants have been warning of coming premium increases simply because requirements of Obamacare increase health care and other costs (via fees and taxes) and while there are efforts to mitigate what we spend on health care services, most are focused on Medicare and there is nothing in place, nothing working now to actually reduce spending.
Why is this all such a concern for the Administration? Because for years it has been promising “affordable” health care and the reality is that what it has provided is access to insurance and more “free” health care both of which make health insurance less affordable.
Government must also be concerned that even with subsidies many people will decide to pay the fine rather than pay premiums for coverage. In addition, higher premiums mean a higher cost for providing those subsidies.
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