Health-Care Premiums Expected to Soar, Insurers Warn

In this photo from March 2010, then-House Speaker Nancy Pelosi, D-Calif., reviews her notes during a news conference on Capitol Hill about reforming the nation's health-care system. (Pablo Martinez Monsivais/AP)

Some Americans could see their insurance bills double next year as the health care overhaul law expands coverage to millions of people.

The nation's big health insurers say they expect premiums -- or the cost for insurance coverage -- to rise from 20 to 100 percent for millions of people due to changes that will occur when key provisions of the Affordable Care Act roll out in January 2014.

Mark Bertolini, CEO of Aetna Inc. (AET), one of the nation's largest insurers, calls the price hikes "premium rate shock."

"We've done all the 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," Bertolini said during the company's annual meeting with investors in December.

To be sure, there will be no across-the-board rate hikes for everyone, and there's no reliable national data on how many people could see increases. But the biggest price hikes are expected to hit a group that represents a relatively small slice of the insured population. That includes some of the roughly 14 million people who buy their own insurance as opposed to being covered under employer-sponsored plans, and to a lesser extent, some employees of smaller companies.

The price increases are a downside of President Barack Obama's health care law, which is expected to expand coverage to nearly 30 million uninsured people. The massive law calls for a number of changes that could cause premiums for people who don't have coverage through a big employer to rise next year -- at a time when health care costs already are expected to grow by 5 percent or more:
  • Changes to how insurers set premiums according to age and gender could cause some premiums to rise as much as 50 percent, according to America's Health Insurance Plans, or AHIP, an industry trade group that's funded by insurers.
  • A new tax on premiums could raise prices as much as 2.3 percent in 2014 and more in subsequent years, according to a study commissioned by AHIP. Policyholders with plans that end in 2014 probably have already seen an impact from this.
  • Requirements that insurance plans in many cases cover more health care or pay a greater share of a patient's bill than they do now also could add to premiums, depending on the extent of a person's current coverage, according AHIP.
The Obama administration says the law balances added costs in several ways, including tax credits that will bring down what many consumers will pay for insurance.

"The health care law will bring down costs and save money for young people and families," said Erin Shields Britt, a spokeswoman for the Department of Health and Human Services. "It's misleading to look at one provision of the law alone. Taken together, the law will reduce costs."

Where 'Rate Shock' May Strike

The impact of some cost hikes will be wide ranging. The new premium tax, for instance, will affect individual insurance, some employer-sponsored coverage and Medicare Advantage policies, which are privately-run versions of the government's Medicare program for the elderly and disabled.

Other price hikes will vary due to factors like a person's current coverage and age. Young people who currently have low-cost coverage may see some of the biggest hikes.

In many states, insurers charge a 60-year-old customer $5 in premiums for every $1 they collect from a 24-year-old. The logic behind that is that older people use health care more and generate more expensive claims than younger customers, so insurers need to collect more to help pay their bills.

But the overhaul will narrow that ratio to 3-to-1. That alone could cause the premium for a 24-year-old who pays $1,200 annually to jump to $1,800, according to AHIP. Meanwhile, the 60-year-old who currently pays $6,000 will see a 10 percent drop in price.

Gender also can be a factor in whether premiums go up or down. The law will prohibit insurers from setting different rates based on gender -- something they currently do because women generally use more health care. That means premiums for some men could rise, while they fall for women.

Prices also may change depending on a person's current coverage. Many policies on the individual market (coverage not sold through employers) exclude maternity coverage, but that will be considered an essential health benefit under the overhaul. That could mean higher prices for some.

Vikki Swanson, 49, of Newport Beach, Calif., resents that the added benefit may lead to higher costs for her. "I had a hysterectomy, I have no need for maternity coverage, but I have to now pay for it," she said.

As a self-employed accountant and financial analyst, Swanson has paid for her insurance coverage on the individual market for about 13 years. She watched her monthly premium climb from around $136 in 2001 to more than $600 before she could find cheaper coverage. She's frustrated that the overhaul may add to her bill.

"I have to pay not only my own premium but I have to subsidize everybody else," she said.

Cushioning the Blow

While insurers forecast instant premiums hikes starting next January, the overhaul also is expected to tame health care costs for many.

Starting next year, the law will require insurers to cover everyone who applies. That means health care costs could fall dramatically for people who have been unable to find coverage due to a chronic condition like diabetes or high blood pressure.

There also will be tax credits, or subsidies, given to people with incomes that fall within 400 percent of the federal poverty level. For 2013, 400 percent of the poverty level for all states except Alaska and Hawaii would be $94,200. These credits won't lower premiums, but they can ease the insurance bill depending on a person's income.

The credits should help the 20-something customers that insurers warn will see big premium hikes, said Linda Blumberg, an economist with the Health Policy Center of the Urban Institute, a nonpartisan policy research organization. She noted that people in that age range are more likely to be either working for an employer that doesn't offer coverage or earning low wages that would entitle them to a sizable credit.

"While these folks are potentially facing some premium increases due to all these reforms, they also are the ones most likely to get the financial help from the exchanges," she said.

There are other changes that will benefit young and poor people. Some may qualify for coverage under the state-federal Medicaid program for the poor and disabled, which will expand in many states next year.

Additionally, people under age 30 who face big premium hikes will be able to buy plans that charge low premiums and just provide coverage for big or catastrophic costs. Those plans also will be available to people required to pay more than 8 percent of their income for coverage.

Plus, people who are age 26 and under are eligible to receive coverage under a parent's plan, thanks to another overhaul provision that already started.

In addition to those changes, insurers will have to compete for business on the exchanges, which could restrain price hikes, said Larry Levitt, a private health insurance expert with the Kaiser Family Foundation, which analyzes health policy issues. He noted, for instance, that some are already creating narrow networks of low-cost providers to help keep costs in check.

"Plans are very focused on trying to get these premiums down," he said.

But Robert Laszewski, an industry consultant and former insurance executive, said that theory assumes there is no competition in the marketplace now. He noted that a small company may get quotes from as many as 10 insurers competing for business when it tries to find coverage through a broker.

"I haven't had one person in the industry remark to me, 'Gosh, I wonder what the other guy's charging,'" he said. "They're worried that all this stuff is so expensive, they're not going to get the pricing right."

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Jeff W.

Lots of fun comments

April 23 2013 at 8:30 PM Report abuse rate up rate down Reply

Insurance companies trying to scare us from Obamacare - gee, could they have a vested interest? Come on, folks. Don't be so gullible - you are smarter than that.

March 18 2013 at 9:15 PM Report abuse rate up rate down Reply

agree with Ricardo. Rates will plummet, not increase. The 80/20 rule, price gouge protection and competition through exchanges. When 45 million people had no insurance, something had to be done. Quit reading anti-Obama propaganda and do your own research. It may surprise you. Don't take my word for it. Get informed.

March 18 2013 at 9:14 PM Report abuse rate up rate down Reply

Get a GRIP people and STOP blaming Obama. It's the insurance companies stupid. They were given millions of new customers in order to spread the cost over the entire population and instead the are using the new law as an excuse to raise premiums. THAT is the problem and shameful. We should have went for the NATIONAL HEALTH CARE plan like the rest of the free world but Republicans wouldn't hear of it !!!

March 15 2013 at 9:51 AM Report abuse rate up rate down Reply


March 14 2013 at 6:07 PM Report abuse +1 rate up rate down Reply

Obama............This will save everyone Money? His own agency now says the cost will double what he originally said it would cost.......
Pelosi...........sign it and will read it later................another warn out old hypocrite politician that needs to go.
I'm sure this will help some but the underlining concept coming from Washington is to cater and pander to the Voting public to get votes...............pure and simple.

March 14 2013 at 5:52 PM Report abuse +4 rate up rate down Reply

Why isn't Obamas family on Obama care if its so great and covers most healthcare costs. Why ! not people. Well the reason for that is because it covers nothing its like going to a clinic sitting all day to be told you have to pay 85 % out of pocket for the procedure. THATS WHY.

March 14 2013 at 5:22 PM Report abuse +4 rate up rate down Reply
Mr. Ganss

CBO now states that PPACA's cost will be more than 3 TIMES the original estimates, only 12 million uninsured will now have health insurance instead of the 30 million that was predicted, it will ADD to the deficit rather than reduce it & premiums are now expected to DOUBLE! Who didn't see this coming?? What an Obama-nation!!

March 14 2013 at 3:37 PM Report abuse +2 rate up rate down Reply
Mr. Ganss

CBO now states that PPACA's cost will be more than 3 TIMES the original estimates, only 12 million uninsured will now have health insurance instead of the 30 million that was predicted, it will ADD to the deficit rather than reduce it & premiums are now expected to DOUBLE! What an Obama-nation!!

March 14 2013 at 3:36 PM Report abuse rate up rate down Reply
Mr. Ganss

CBO now states that the cost will be more than 3 TIMES the original estimates, only 12 million uninsured will now have health insurance instead of the 30 million that was predicted & premiums are now expected to DOUBLE! What an Obama-nation!!

March 14 2013 at 3:34 PM Report abuse rate up rate down Reply