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.”