Health-Care Overhaul Seen Driving Claims' Costs Up 32%

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healthcare overhaul costs obamacare medical claims
J. Scott Applewhite/AP President Obama signs the health-care bill into law in this March 2010 photo. A new study suggests medical-claims costs for individual policy holders will jump an average 32 percent.
By RICARDO ALONSO-ZALDIVAR

WASHINGTON -- A new study finds that insurance companies will have to pay out an average of 32 percent more for medical claims under President Barack Obama's health-care overhaul.

What does that mean for you? It could increase premiums for at least some Americans. If you are uninsured, or you buy your policy directly from an insurance company, you should pay attention.

But if you have an employer plan, like most workers and their families, odds are you don't have much to worry about. The estimates from the Society of Actuaries could turn into a political headache for the Obama administration at a time when much of the country remains skeptical of the Affordable Care Act.

The administration is questioning the study, saying it doesn't give a full picture -- and costs will go down. Actuaries are financial risk professionals who conduct long-range cost estimates for pension plans, insurance companies and government programs.



The study says claims costs will go up largely because sicker people will join the insurance pool. That's because the law forbids insurers from turning down those with pre-existing medical problems, effective Jan. 1. Everyone gets sick sooner or later, but sicker people also use more health care services.

"Claims cost is the most important driver of health care premiums," said Kristi Bohn, an actuary who worked on the study. Spending on sicker people and other high-cost groups will overwhelm an influx of younger, healthier people into the program, said the report.

The Obama administration challenged the design of the study, saying it focused only on one piece of the puzzle and ignored cost relief strategies in the law, such as tax credits to help people afford premiums and special payments to insurers who attract an outsize share of the sick.

The study also doesn't take into account the potential price-cutting effect of competition in new state insurance markets that will go live Oct. 1, administration officials said.

At a White House briefing Tuesday, Health and Human Services Secretary Kathleen Sebelius said some of what passes for health insurance today is so skimpy it can't be compared to the comprehensive coverage available under the law. "Some of these folks have very high catastrophic plans that don't pay for anything unless you get hit by a bus," she said. "They're really mortgage protection, not health insurance."

Sebelius said the picture on premiums won't start coming into focus until insurers submit their bids. Those results may not be publicly known until late summer.

'Double-Digit' Increases

Another striking finding of the report was a wide disparity in cost impact among the states.

While some states will see medical claims costs per person decline, the report concluded that the overwhelming majority will see double-digit increases in their individual health insurance markets, where people purchase coverage directly from insurers.

The differences are big. By 2017, the estimated increase would be 62 percent for California, about 80 percent for Ohio, more than 20 percent for Florida and 67 percent for Maryland. Much of the reason for the higher claims costs is that sicker people are expected to join the pool, the report said.

Part of the reason for the wide disparities is that states have different populations and insurance rules. In the relatively small number of states where insurers were already restricted from charging higher rates to older, sicker people, the cost impact is less.

The report did not make similar estimates for employer plans that most workers and families rely on. That's because the primary impact of Obama's law is on people who don't have coverage through their jobs.

A prominent national expert, recently retired Medicare chief actuary Rick Foster, said the report does "a credible job" of estimating potential enrollment and costs under the law, "without trying to tilt the answers in any particular direction."


"Having said that," Foster added, "actuaries tend to be financially conservative, so the various assumptions might be more inclined to consider what might go wrong than to anticipate that everything will work beautifully." Actuaries use statistics and economic theory to make long-range cost projections for insurance and pension programs sponsored by businesses and government. The society is headquartered near Chicago.

Bohn, the actuary who worked on the study, acknowledged it did not attempt to estimate the effect of subsidies, insurer competition and other factors that could offset cost increases. She said the goal was to look at the underlying cost of medical care.

"We don't see ourselves as a political organization," Bohn added. "We are trying to figure out what the situation at hand is."

On the plus side, the report found the law will cover more than 32 million currently uninsured Americans when fully phased in. And some states -- including New York and Massachusetts -- will see double-digit declines in costs for claims in the individual market.

Uncertainty over costs has been a major issue since the law passed three years ago, and remains so just months before a big push to cover the uninsured gets rolling Oct. 1. Middle-class households will be able to purchase subsidized private insurance in new marketplaces, while low-income people will be steered to Medicaid and other safety net programs. States are free to accept or reject a Medicaid expansion also offered under the law.

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AP White House Correspondent Julie Pace contributed to this report.


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21 Comments

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gtalberts25

If the president was able to tell the truth, he should have said what everybody already knew from the beginning. What he should have said: We need national healthcare for everyone, people with no insurance, people with pre existing conditions, just simply everyone. This will cost each and every one of you a little bit more money but it needs to be done. Instead he sold us a bill of goods, insisting that health care costs will come down, you premiums will come down and with all the savings we can help pay down the debt. Blatant lies!!

March 27 2013 at 12:15 PM Report abuse rate up rate down Reply
1 reply to gtalberts25's comment
scottee

so....he could give everyone what seniors and government workers have. and skip the vacations and luxury and non essential spending. right?

March 27 2013 at 12:25 PM Report abuse rate up rate down Reply
1 reply to scottee's comment
buddyboygabe

skip the vacations and luxury and non essential spending. right?>>>>>>>>>oh nooooo, not WH, can't do without vacations and luxury items...infact, his 2 daughters went on another vacation to Bahams with tax payers tab.

March 27 2013 at 12:38 PM Report abuse +2 rate up rate down
gecdds

Affordable health care. What a joke! This will price many, probably me, out of insurance.

March 27 2013 at 12:00 PM Report abuse +2 rate up rate down Reply
Farthead

This study funded by Aetna, Blue Cross, United healthcare. Thank you.

March 27 2013 at 11:38 AM Report abuse +1 rate up rate down Reply
1 reply to Farthead's comment
scottee

so, not only can they charge more....the government will subsidize them.

March 27 2013 at 12:26 PM Report abuse -1 rate up rate down Reply
setanta995

..............On the plus side, the report found the law will cover more than 32 million currently uninsured Americans when fully phased in. And some states -- including New York and Massachusetts -- will see double-digit declines in costs for claims in the individual market..........

another massive load of bullspit-
there was NEVER ANY 32 MILLION AMERICANS uninsured
and assachusettes went broke from ruMNey care which IS the model for this crappola and as for ny ???? LM@O !

how does anybody STILL BELIEVE THE SCATOLOGY from this mediyuuh ?

March 27 2013 at 11:21 AM Report abuse +1 rate up rate down Reply
setanta995

where's eVAn and all his multiple personAs to extol the virtues of obummer etc ?
boards are vacant without him---LOL !

March 27 2013 at 11:15 AM Report abuse +1 rate up rate down Reply
setanta995

..............By 2017, the estimated increase would be 62 percent for California, about 80 percent for Ohio, more than 20 percent for Florida and 67 percent for Maryland......................
LM@O ! diMwitted cali and corrupt oHIo/voter FRAUD STATE get banged good-

to all the good people of these states ? vote with your feet and MOVE to a state WHERE YOUR VOTE GETS COUNTED.

March 27 2013 at 11:14 AM Report abuse +1 rate up rate down Reply
setanta995

gee......co$t$ will go up ? how can this happen--it was SUPPOSED TO BE FREE !!!!!!!!

bleeeeeeeeedin morons dweebs and drones will get WHAT THEY DESERVE...even that ugly animal bill maher is cryin the blues about his TAX BILL
AAAAAAAAAAAAAAAAAAAND WE CAN'T WAIT TO RANK OUT THE MORONS IN THE SOON TO BE STANDING ROOM ONLY MEDICAL OFFICES as they WAIT to get their 10minutes before the nurse practicioner
and NOTHING AGAINST THEM EITHER
BUT DO THEY BELONG in this EXPANDED ROLE ?

March 27 2013 at 11:06 AM Report abuse +4 rate up rate down Reply
watchclock

The bottom line is, they make more money. Everybody will be forced into govt. ran health plans through the people not being able to pay for health insurance, effectively putting insurance companies and plans put of the regular peoples reach.

March 27 2013 at 10:23 AM Report abuse +1 rate up rate down Reply
1 reply to watchclock's comment
setanta995

yeah and the gubmint TOOK OVER OUR HEALTH CARE without a bang or even a freeeeekin whimper.

March 27 2013 at 11:07 AM Report abuse +1 rate up rate down Reply
1 reply to setanta995's comment
scottee

some of us wimpered. the tea party wimpered but they drown in the two party swamp that is Washington, DC.

March 27 2013 at 12:27 PM Report abuse +1 rate up rate down
michael6179

Didn't most real Americans say this when that psycho Nancy Pelosi was out babbling about how great it was going to be, and how it would unleash the entrepreneurial spirit of the American people? Is there a more vile, disgusting, piece of human trash than Nancy Pelosi???

March 27 2013 at 10:19 AM Report abuse +2 rate up rate down Reply
2 replies to michael6179's comment
watchclock

Yep, all politicians.

March 27 2013 at 10:25 AM Report abuse rate up rate down Reply
setanta995

what gives with californicate--prop 8 PROVES THERE IS A CONSERVATIVE MAJORITY so how the hell IS SHE AND HER CORRUPT COMMIE COHORTS being reelected over and over ?
and people WAKE UP--we don't live there,we don't/can't VOTE FOR THEM
BUT
the SCATOLOGY THEY PROPOSE,gets VOTED IN AND AFFLICTS US ALL NATIONWIDE,

HAD ENOUGH ?

March 27 2013 at 11:09 AM Report abuse rate up rate down Reply
dxpaper

This is the bill that was promised to lower health care costs.
Is there no accountability for this?
Is there no shame?

March 27 2013 at 10:04 AM Report abuse +1 rate up rate down Reply
1 reply to dxpaper's comment
watchclock

How many promises have politicians kept? None !!!

March 27 2013 at 10:23 AM Report abuse +1 rate up rate down Reply