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The Truth About Health Care Reform’s Impact On Insurance Premiums
In his speech at the Families USA Health Action Conference this week, President Obama proclaimed that the PPACA would result in lower health insurance premiums for Americans.
The speech comes on the heels of a Dept. of Health & Human Services report claiming that middle-class families could save as much as $2,300 in premiums, while small businesses can look forward to savings of up to $350 for each family covered.
Meanwhile, opponents of reform argue that not only will the new law raise premiums as the provisions go into effect, the law is already causing large increases in premium rates as evidenced by the recently announced rise in Blue Shield of California’s premium charges of up to 59% for their individual policy holders.
Who is telling the truth?
Everybody and nobody.
Let’s start with the GOP argument suggesting we are already feeling the pain thanks to Obamacare.
True? Not so much. By all objective measurements, the new law is having a minor impact on current premium rates.
While the naysayers point to the huge rise taking place in California as an example, it must be noted that even California Blue Shield does not blame the law for the painful rise in its premium prices. In a statement issued with the announcement of the increase, the company said, “These rates reflect trends that were building long before health reform.” The company further indicated that higher prices demanded by health care providers, more use of health care, and healthy people dropping their coverage because of the bad economy were the real culprit.
Further, in a recent analysis conducted by Hewitt Associates, a well-respected human resources firm, the company estimated that employers would likely see a rise in premium costs averaging 8.8% in 2011. This is within the norm for what we have seen in annual raises over the years preceding passage of the health care reform law. Further, the firm estimates that the new law will account for, at best, one to two percent of the increases.
It would thus seem fair to say that the opponents of healthcare reform are certainly overstating their case.
But what about the President, HHW and other supporters of the reform?
They too are being something less than completely accurate in the presentation of their arguments.
As noted earlier, the president stated in his Families USA speech “this law will lower premiums.”
While that may be true for lower income people with individual policies who will pay less out-of-pocket thanks to the government subsidies they will receive, I don’t think anyone would buy into the idea that the actual premium charges will come down. It will simply be a matter of the government picking up a share of the bill on behalf of the insured.
There should also, for a period of time, be some lowering of net costs to small businesses that will receive a tax credit for providing their employees with health care benefits. Indeed, we are already seeing some anecdotal evidence that the tax credits are inspiring small business employers to provide coverage.
But that doesn’t really mean the premium costs are lower.
The truth is, were the PPACA to manage to slow down the annual rate of increase in premium costs, we should consider the law a major success. But expecting it to actually lower present premium rates is probably a stretch.
As for the newly released HHW report, one has to read carefully to see what the study actually reveals.
While the report suggests that middle-class families can save up to $2300 annually in premiums along with small businesses experiencing a savings of up to $350 for each family covered, these numbers are the result of a comparison to what premiums are projected to have been had the ACA not been passed.
In other words, without the law, a middle-class family might have paid up to $2300 more in premiums. But that doesn’t mean that premium costs are going down – it just means that they aren’t going up as much as they would have had the law not been passed.
If true, this is good news – just not as good as HHW might wish to make it appear.
What’s more, HHW is relying on CBO estimates without stating all of what the Congressional Budget Office had to say on this subject.
In fact, the CBO has suggested that while there should be some price benefit to the employers not providing Cadillac health benefit plans – and their employees who receive their health care benefits through their employment – the agency has also suggested that those left to buy their own, individual policies may experience increases come 2016. These increases could total up to 13% more than what individual policy holders might have had to pay for an insurance policy had there never been an Affordable Care Act.
That, of course, is the part the GOP likes to hit hard.
But when they do so, our Republican friends tend to leave out the added codicil to the CBO projection. With the benefit of government subsidies being made available to help small business and lower-income people purchasing individual coverage, about half of the folks who will purchase the individual policies will end up spending less out-of-pocket than they would have without the reform act.
Bottom Line –
The Republicans are being more than a little disingenuous when they blame health care reform for raising our current health insurance rates.
As for the bold predictions of lower premium rates being offered by the Democrats – time will tell.
We can speculate that the ACA will slow the rise in premium costs – or not. But we simply are not going to know how this will all shake out until a number of years from now.
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[...] The Truth About Health Care Reform’s Impact On Insurance Premiums – Forbes (blog) Posted by source on January 29, 2011 0 Comment In his speech at the Families USA Health Action Conference this week, President Obama proclaimed that the PPACA would result in lower health insurance premiums for Americans. The speech comes on the heels of a Dept. of Health & Human Services report … Health Insurance – Bing News [...]
Obama health care plan is more beneficial for a majority of our people at large.Its opponents are opposing this welfare health plans simply to polticize the issues and those opponents also lack a tangible material to confront Obama care system.Obama care would provide proper checks and balances over the deals of the medical professionals/clinics who have developed a huge nexus with the insurance companies on one hand whilst they have deep relations with the pharmaceutical companies.In fact,the lobby of this nexus is very strong and its this lobby which is opposing Obama’s health care plans as their own business stands to suffer the impact of the said plan.
I agree regarding the value of Obamacare.
In response to another comment. See in context »You know, after I finished commenting there was something bothering me. I could swear that I had read something of importance about Michigan BCBS. I also remembered it because I used to have BCBS in Michigan when I lived there and they not only were constantly raising rates but they were awful.
Turns out I was right. This wonderful insurance company that you are holding out as being forced to raise your rates because of health care reform not only has a long history of raising rates by significant amounts, they are currently being sued by the government for a price-fixing scheme that has resulted in premium rates being more expensive than they should be for ALL Michiganders.
You might wish to read the following -
http://www.washingtonpost.com/wp-dyn/content/article/2010/10/18/AR2010101805585.html
In response to another comment. See in context »[...] Forbes (blog) [...]
Insurance rates would have gone up with or without Obamacare too and the benefits for the middle class, of which I am part of have helped many with affordability.
We live in a time and place where we have business intelligence war fare with insurers now working on the same algorithmic technologies and strategies used on Wall Street for profit, so catch up time it is for all of us and we need the help from the government right now, as otherwise we are taking a knife to a gun war and there seems to be no end to the innovation of new plans and business models that can carve out more profit.
http://ducknetweb.blogspot.com/2011/01/high-frequency-electronic-trading.html
It’s sadly all about the math when it comes to profit and the people behind those numbers are getting camouflaged.
I don’t think the GOP understands this too well but I think the President does as he hired a new “Algo Man” for the chief of staff job and we will so how long it takes the rest to catch up I guess.
http://ducknetweb.blogspot.com/2011/01/president-obama-names-new-hybrid-chief.html
I do wonder about going back to non profit insurer status too since this is going to be law to have insurance in a few years. Health insurance is not like a car where you choose to have one or not, we are born with it. You can choose to either own or not own a car and take out the mandatory insurance that goes with it but on life, the alternative choice is not good in my book:)
I don’t think the GOP understands this too well —
In response to another comment. See in context »I don’t think that their problem is a lack of understanding, rather, I think so many of those companies have contributed to their campaigns and now the repubs ‘owe’ them.
After reading this unfortunately biased piece, I felt compelled to join Forbes and comment.
First, the statement that the premium increases were built in before Obamacare. Our premium went up $100/month here in MI with BCBS NONPROFIT health insurance. The reason is that we now had some elements of the healthcare bill being enacted. So, now we have 1 preventative care visit/year, STD awareness, immunizations, abortion counselling, limits on maximums and a few other sundry items. So, obviously, my plan has changed and BCBS was forced to change it. Now, I cannot keep my old plan because I now have a new plan.
You are being intellectually dishonest when you state that premium increases are not a result of the new healthcare bill.
Next, opponents of the healthcare bill have every right to suggest that more people in the system means more premiums/taxes for some to subsidize others. It is appalling to me that the individual policy holders with take a big hit with Obamacare. This is the group that Obama said was “only 4 million or so” policy holders that would suffer the consequenses of Obamacare. Premiums have gone up, and will most likely never decrease. When has a gov’t program ever been a real fiscal success story. We are heading for gov’t run medical system. Opposition to the REAL plan for universal healthcare is good, and should be robust since Canada’s health system is not what we should look to emulate as a model system.
Do not be such a hater of Conservatives; We understand accounting and can see a fiscal trainwreck a mile away. Do not think for a moment that we are not gonna tell that to anyone who will listen.
I suppose it would be possible for this piece to be biased – if it were not for the fact that it is simply a recitation of data for which authority is provided.
“Next, opponents of the healthcare bill have every right to suggest that more people in the system means more premiums/taxes for some to subsidize others. ”
I think that is exactly right -but I never said otherwise. The topic of the piece is impact on insurance premiums – not a discussion on the propriety of potential increases in taxes or expenditures of federal funds for the subsidies that will be provided.
You might want to give just a small bit of thought to who is showing bias here. I write many pieces about many elements of health care reform, and your points would be appropriate to a number of those columns, however for this particular piece, you’re really way off topic,
By the way, the fact that your premiums went up on your non-profit health insurance in no way is suggestive that it it the result of the new legislation. If you are going to state this to be the case, don’t you think you ought to provide some authority- you know, where your insurance company actually says this is why it went up? You are the one that needs to be honest – I’m pretty comfortable that were I to go and look up the tables of your company’s premium rates over the past number of years (well before Obamacare was a glimmer in the president’s eye) I will find there will be annual = or at least bi-annual increases.
In response to another comment. See in context »Mr Unger,
In response to another comment. See in context »Late December 2010, we recieved a form letter from BCBC MI stating since congress had passed healthcare reform (which they were all for, might I add)they had to institute new additional health benefits to all members. Therefore, we have added an additional $100 to your premium starting January 1, 2011.
I did not pull this out of a hat; BCBS did.
Oh, and by the way, I am a CPA and business owner. I personnally do not know one CPA or business owner who is not convservative.
All that said, by the way, I am pleased that you joined Forbes even if only to vent.
In response to another comment. See in context »I’m not a ‘hater’ of anyone because of their political bend or opinions. However the ‘we understand accounting’ is a bit much. Word is, I have a pretty good grasp on a balance sheet having run a NYSE company…and I’m not much of a conservative.
In response to another comment. See in context »[...] Forbes (blog) [...]
Hello Maisie3,
Mr. Unger is clearly a supporter of the PPACA so he may indeed be biased but does not mean that he is wrong. I would point out that it is not as if medical insurance premiums have never increased before. In the 1970’s Richard Nixon proposed the Comprehensive Health Insurance Plan to address rapidly raising medical costs and insurance premiums. Jimmy Carter and Bill Clinton did the same for the same reasons. That 40 years later the cost of medical insurance are still raising is both hardly surprising and hardly the result of the PPACA.
You’ll forgive me if I bear some suspicion towards the true motives of Blue Cross Blue Shield of Michigan considering they have, allegedly, been engaging in price fixing for years, effectively not only screwing their own members but making health care more expensive for just about everyone in your state.
As for CPA’s cornering the market on conservatism, I’ll be sure to tell my own that he either has to turn in his accreditation or re-register as a Republican. Who knew that CPA’s were required to adopt a conservative ideology?
In response to another comment. See in context »[...] See the original post here: The Truth About Health Care Reform’s Impact On Insurance Premiums [...]
daviddelosangeles: Nixon imposed price controls to stop inflation. The results were a disaster on the economy. Price controls on insurance premiums would also be a disaster. There is not a single place on the planet where ObamaCare has been tried where economic growth and the overall standard of living is not significantly lower than the U.S. and/or the costs of insurance have not gone up or quality of care declined. Can you name one place? What the U.S. has never tried is a fee market across the board. But where a free market has been tried, such as lasek eye surgery, quality has improved and prices have come down. You and Mr. Unger is incredibly ignorant on economics and the topic of health care in particular. It baffles me that he is qualified to write for Forbes.
Mr. Ozanian,
I fear that you have missed the point of my posting. I was not arguing for or against Mr. Nixon’s policies, I was merely pointing out that there is a very long history of inflation in medical insurance premiums. Recent jumps in insurance premium costs are hardly new and cannot be attributed to the recent passage PPACA.
In response to another comment. See in context »There are a few European countries that might take issue with your suggestion that their standard of living is somehow not as good as our own. And then I imagine the Austrailians, who provide both a private and a public system might take some exception.
Finally, do contributors really want to begin accusing one another of ignorance? I realize that, since you write about sports, you obviously excel in economics, but…..
In response to another comment. See in context »The UN and Mercer standard of living index-
1. Iceland
2. Norway
3. Canada
4. Australia
5. Ireland
6. Netherlands
7. Sweden
8. Japan
9. Luxembourg
10. Switzerland
11. France
12. Finland
13. Denmark
14. Austria
15. United States
16. Spain
17.Belgium
18.Greece
19.Italy
20.New Zealand
21.United Kingdom
Gee Mike, call me ignorant- oh wait, you already did that- but I see many countries ranked well above our own that I believe you would count among those you refer to as having lower standards of living thanks to Obamacare style health care.
I know I’m weak on economics but I’m pretty sure that the number 15 next to the US means it has a lower standard of living than the countries listed with lower numbers (you know, 1-14) ….or did I miss that day in second grade and get this wrong too?
In response to another comment. See in context »The free market advocates always wheel out Lasik as an example that ‘makes their case’.
But it’s a quick procedure mostly carried out for cosmetic reasons and bears little relation to say how you would organise multidisciplinary care for cancer over many weeks, or many years say for diabetes among people with multiple health problems.
And Lasik not as safe or effective as you might think – the FDA has ongoing concerns, and it is performed mostly outside of teaching hospital settings.
In response to another comment. See in context »This is a common approach. Take something that is not covered by insurance, would not be affordable by many Americans and is an optional surgery to say the least- and use that as an example for a successful demonstration of free market principles in health care. As you correctly note, somehow the analogy is not particularly applicable to more serious drugs and treatments where the alternative to treatment is death.
In response to another comment. See in context »Sorry Big buddy, you’re off on this one. Only the uninspired, choose not to have personal insurance (rates aren’t nearly as high as you say), living on the system, taking advantage of the system, dregs feeding off the governnment benefit, and that’s what the government wants. However there are several million Americans left who choose not to participate in the non-choice power grab, what’s next single payer housing, government telling us we only have three choices of cars to drive, and to pay all extra fees and taxes so everyone else can have a “FREE” car? BS! enough
I’m in the health insurance business, rates are going up because of GOVCARE and lawyers and big PHARMA, and illegals, and cost shifting. Why aren’t we fixing those? because it’s all politics and the next election, get out! enough already! let us be Americans!
[...] that the PPACA would result in lower health insurance premiums for Americans. Read more on Forbes Share and [...]
[...] the rest here: The Truth About Health Care Reform’s Impact On Insurance Premiums Filed Under: INSURANCE NEWS, health insurance, insurance About admin blog comments [...]
healthy people dropping their coverage because of the bad economy were the real culprit.
This would seem to indicate that the PPACA requirement that all citizens carry some health insurance is absolutely right.
To Forbes and Rick,
Love the rebuttals!
This from: http://www.dcourier.com/main.asp?SectionID=36&SubsectionID=73&ArticleID=90100
“Their job-killing claim comes from the Congressional Budget Office’s August 2010 report, which says the Health Care Act would reduce the amount of labor by 0.5 percent, or about 1.6 million people. So Republicans now claim that Obamacare is a job killer. Looking closer at the report, however, we see that this statement misrepresents the facts.
The CBO’s August report went on to say that this 0.5 percent reduction in the labor force would be because of more people choosing to retire earlier because of the reduced cost of health insurance under the new law. Thus Obamacare won’t “kill 1.6 million jobs.” The new law will allow 1.6 million folks to retire, and in turn will allow the unemployed to be hired into those jobs. In effect, the new law will reduce unemployment numbers by 1.6 million.
In addition, the Center for American Progress has published a study by Harvard economist David Cutler suggesting that if the health care law is repealed, health insurance costs will resume their upward climb, costing the country 250,000 to 400,000 jobs.
Putting these two facts together, the health care law will makes an additional 3.5 million people very happy: 1.6 million will be able to retire, and 1.6 million will replace these new retirees and come off the unemployment rolls. And keeping Obamacare will have saved at least 300,000 jobs.
The Republican message, though loud and strong, is again based on half-truths and is purposely misleading.”
Aside from the typical Republicans insults, this is a great forum!!
Thanks. Hope you’ll keep reading.
In response to another comment. See in context »[...] The Truth About Health Care Reform’s Impact On Insurance Premiums (blogs.forbes.com) [...]
My rates went up. They might have went up anyway but there’s no way to know if it was due to Obamacare or not. What I can be pretty sure of however, is that my previous insurance removed their best coverage plan because of the new law. Obamacare got a lot of things wrong.
As to the “slow down” of rate increases: The Democrats need to stop claiming that Obamacare slowed the rising rates. It’s an unprovable statement and doesn’t offer much consolation to the person paying the bills. Everyone should see this law as what it really is. Wealth redistribution – taking from one group to give to another. I really it lowers costs and doesn’t over burden tax payers. Unfortunately, government doesn’t have a good track record estimating the costs of these kinds of programs.
Correction: ” I really hope it lowers costs and doesn’t over burden tax payers”
In response to another comment. See in context »[...] proclaimed that PPACA would result in lower health insurance premiums for Americans. Read more on Forbes Torrey Pines Tiger left in the note down after carding 75 Tiger Woods began his 2011 season on [...]