Did health reform drive up insurance premiums? Depends on the plan.
When a survey earlier this week found that health insurance premiums had risen 9 percent this year, the usual suspects made their usual arguments. “As this survey shows, the president’s promise that his partisan health law would lower costs was just empty rhetoric,” Sen. Orrin Hatch (R-Utah) said in a statement, joining a chorus of congressional Republicans pointing a finger at the Affordable Care Act. The White House pushed back. “We know that the Affordable Care Act will help make insurance more affordable for families and businesses across the country,” Nancy-Ann DeParle recently wrote on the White House blog. So, who is right?
Everybody — and nobody. When it comes to rising health premium costs and the health reform law, there’s no one-size-fits-all explanation. A great new study from the consulting firm Aon Hewitt makes this point by digging into the 2011 numbers and lays out how, exactly, the health reform law has impacted health insurance premiums so far.
Across the board, Aon attributes 1.5 percent of premium bumps in 2011 to the reform law, pretty close to estimates from both the White House and other consulting firms. But that 1.5 percent increase is an average and doesn’t say much about different insurance-market segments. Here’s how that breaks down, for this year, in the Aon study:
In the large group market, where health insurance tends to be more robust, the increase is lower, less than 1 percent, as those plans tend to already cover the benefits that the Affordable Care Act now requires. In the individual market, benefits packages are often skimpier. The price increase is higher there, nearly 5 percent. To be sure, the beneficiary is receiving a richer benefit package, but also a higher bill.
“The impact depends on where you start,” Karen Igagni, president of America’s Health Insurance Plans, told me Friday morning. “If an individual has purchased primarily catastrophic coverage, it will add to the cost of coverage much more than for a small employer or large employer who already had a broader benefit package.”
In some cases, the addition of new benefits can even drive down the cost of health insurance. Aon Hewitt also had carriers report the impact of health reform’s new benefits on premium costs. In all markets, the extension of dependent coverage up to age 26 actually pushes the cost of coverage down. “Since dependents under age 26 are generally healthy, extending coverage to this group may result in bringing more low-cost members into the plan and thus lowering the per member cost,” the report concludes.
In other cases, the new benefits can be expensive: Individual market plans estimate that the end of pre-existing conditions for children will increase premiums by as much as 6 percent. Here’s what all that looks like in a graph (keep in mind these are now ranges, not averages):
What health reform’s early-to-implement benefits mean for the cost of premiums really depends on what the starting benefit package looks like. And what the rest of the law means is a whole different ballgame: In 2014, the mandated purchase of health insurance, as well as public subsidies to purchase coverage, will come into effect. All those changes will vastly overhaul the individual insurance market.
This research focuses on the cost of the benefits that have already come online. Because so many benefits packages are starting from very different places right now, any blanket statements or average numbers are likely to miss what’s actually happening in different insurance-market segments.