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KFF FAQ on expected healthcare premiums in 2014
Old 03-30-2013, 12:21 PM   #1
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KFF FAQ on expected healthcare premiums in 2014

Kaiser Family Foundation has published a short Q&A that comments on some of the recent predictions about healthcare price changes in 2014 that are appearing in the media. KFF permits full reproduction, so I thought I'd post it here. They make some good points here we may find useful as we discuss how this impacts us. (KFF page is here)

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It’s too early to know how much individual health insurance policies will cost once the online marketplaces created under the Affordable Care Act launch Jan. 1. But that hasn’t stopped experts and interest groups from making predictions. The latest analysis comes from the Society of Actuaries. It’s attracting attention because of the group’s expertise and nonpartisanship. What actuaries do for a living — predicting future expense based on multiple squishy factors — is at the core of figuring out what will happen under Obamacare.

Thanks to subsidies and the requirement that everybody get insurance or pay penalties, the society forecasts that the number of people covered by individual polices will double to 25.6 million by 2017.
Getting the headlines was the forecast that insurer costs — medical claims per policyholder — will soar, on average, 32 percent for the individual market in 2017, with wide variations among states. That’s not the same thing as saying prices consumers pay for policies will rise 32 percent. But if claims are higher, insurers generally charge more.
Opponents of the health overhaul seized on the figure to suggest the law could really be called the Unaffordable Care Act. The Obama administration says the study leaves out factors that will restrain what plan members actually pay, including more competition among insurance companies.
Kaiser Health News reporter Jay Hancock talked to experts to learn what it means for the consumers the health law was meant to help.

Q: What’s predicted to drive up costs?
A: Many of those seeking coverage in online marketplaces -- known as exchanges -- are expected to be older and sicker. They’ll have more incentive to buy policies, and they’ll tend to increase claims paid by insurers.
On the other hand, “young and healthy people are less likely to be interested in insurance, because they’re less likely to find value,” said Kristi Bohn, a consultant for the Society of Actuaries who worked on the report.
The penalty for not having insurance is likely to be far less than the cost of coverage. The fewer young or healthy people who sign up, the higher the costs per plan member.
The authors also made assumptions about how many employers will cancel their plans. Companies with sicker workforces are predicted to be more likely to end employer-based coverage and steer people toward exchanges.

Q: I get insurance at work. Were they talking about my insurance claim costs?
A: No. This report was just about people who buy on the individual insurance market, currently under 10 percent of the country, though that's expected to go up as the law kicks in. The vast majority of Americans get insurance through work or through government programs (Medicare, Medicaid, the military).

Q: Does the study predict health insurance premiums will go up 32 percent by 2017?
No. First, it’s only forecasting the individual insurance market. That’s where millions of Americans newly covered under the ACA are expected to find policies. The report says nothing about costs for employer-based health insurance.
Equally important, the 32 percent forecast is for medical expenses paid by insurers, not what insurers will charge in premiums, and not what consumers will pay.

Q: But if medical claims go up, shouldn't insurance prices also go up? How much difference could there be?
A: In the individual market designed under the health law, quite a bit, say supporters. The ACA limits insurer profits and also gives government regulators oversight of rate increases, both of which could hold premiums down.
Even if sticker prices rise, an important feature of the health law is subsidies for people to buy insurance, through tax credits for those with lower incomes. So what many newly-insured people actually end up paying themselves won’t be the same as what the insurance company bills.
Thanks partly to subsidies, "many people buying individual coverage today will see decreases in costs," said Larry Levitt, senior vice president at the Kaiser Family Foundation. (Kaiser Health News is an editorially independent program of the foundation.)
Insurers who end up signing lots of sicker members will also be partly reimbursed for several years by a reinsurance pool designed to lower their risk. That will lower their expenses, and it wasn’t accounted for by the SOA study.

Q: Does it matter where I live?
A: Yes. The report found huge variability, based on geography. While the estimated increase would be 62 percent for California by 2017, in New York state, the report estimates claim costs would drop by almost 14 percent.

Q: Will health plans offer the same coverage in 2017 that they do now?
A: That’s another reason the 32-percent headline could be misleading. Thanks to ACA minimum coverage requirements, benefits will be more generous starting next year. So what insurers pay in claims can expected to be higher, too.
“The number of people who are underinsured has grown dramatically over the last decade,” said Sara Collins, a vice president at the Commonwealth Fund. "One reason claims might be a lot lower now is the benefit package is so crummy.”
The health law was intended to shift spending into the commercial insurance system that is now outside it: high out-of-pocket costs for those in low-benefit plans; uncompensated emergency-room care; patients paying in cash, and so forth. Moving those costs under the insurance umbrella increases insurance-based spending.

Q: The idea of the insurance exchanges is to create competition, isn't that supposed to lower costs?
A: Yes. The idea behind state health exchanges is that insurers will compete for business by pressing providers for discounts and passing part of the savings to members. The actuary study didn’t account for that kind of competition.
"Every insurer I’ve talked to says they’re building lower-cost networks that they plan to use for their exchange plans," said Levitt.

Q: Does this mean costs in the health exchanges aren't a concern?
A: No. Many consumers will pay more in premiums to get more in benefits. The high cost of medicine could mean that, even for those getting big subsidies, affordability will be an issue.
Many consumers "will be moving into a really fully insured product for the first time, so there may be a higher cost associated with getting into that market," Health and Human Services Secretary Kathleen Sebelius said this week.
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Old 03-30-2013, 12:32 PM   #2
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Originally Posted by MichaelB View Post
Kaiser Family Foundation has published a short Q&A that comments on some of the recent predictions about healthcare price changes in 2014 that are appearing in the media. KFF permits full reproduction, so I thought I'd post it here. They make some good points here we may find useful as we discuss how this impacts us. (KFF page is here)

the key part is the lower-cost-network. Just exactly does that mean.why would any insurer have a higher-cost-network. seems they would just want a most profitable network
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Old 03-30-2013, 01:01 PM   #3
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Q: What’s predicted to drive up costs?
A: Many of those seeking coverage in online marketplaces -- known as exchanges -- are expected to be older and sicker. They’ll have more incentive to buy policies, and they’ll tend to increase claims paid by insurers.

They may have more incentive, but they may still not have enough money.
Even with tax credits, and paying $432/month, I am thinking there are many people who will not buy insurance because they can't afford it.


The penalty for not having insurance is likely to be far less than the cost of coverage.

Another reason older, sicker people may not sign up. I know a few already.

The authors also made assumptions about how many employers will cancel their plans. Companies with sicker workforces are predicted to be more likely to end employer-based coverage and steer people toward exchanges.

Or have their positions eliminated altogether.


It is going to be interesting, to say the very least, to see how this all plays out.
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Old 03-30-2013, 04:05 PM   #4
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Thanks MichaelB. That looks still reasonable. We should be hitting the exchanges for 2014. I never expected the costs to be much better than COBRA.
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Old 03-30-2013, 07:25 PM   #5
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Just dawned on me that if one lives from paycheck to paycheck and doesn't have much in the way of net worth, I can see that such folks might take a flyer and go uninsured and pay the tax penalty. If they get lucky and have no major illnesses they come out ahead, if they're unlucky then they lose what little they have and go on Medicaid. And if they get lucky after a few years they may well then have something worth losing and join the insured.

I'm not advocating that by the way, but just trying to anticipate what people in such situations might do.
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Old 03-30-2013, 08:59 PM   #6
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Just dawned on me that if one lives from paycheck to paycheck and doesn't have much in the way of net worth, I can see that such folks might take a flyer and go uninsured and pay the tax penalty. If they get lucky and have no major illnesses they come out ahead, if they're unlucky then they lose what little they have and go on Medicaid. And if they get lucky after a few years they may well then have something worth losing and join the insured.

I'm not advocating that by the way, but just trying to anticipate what people in such situations might do.
Even folks with some assets will prob choose to do this under ACA- as many are today. US Govt estimates that ~11% of uninsured have family income >500% of fed poverty level (~$95k/yr for family of 4)
Overview of the Uninsured in the United States: An analysis of the 2005 Current Population Survey: Issue Brief
And it is not rare for employees with access to decent employer-sponsored HI to decline it so they avoid paying their share of the premiums.
Employee declines coverage through employer-sponsored group health insurance plan
Report Shows Decline in Employees Accepting Health Insurance, Rising Insurance Premiums Across Nation - Robert Wood Johnson Foundation
This is such an issue that IIRC Oregon & VT have actually prohibited an employee from declining employer-sponsored HI unless they can prove existing HI coverage.
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Old 03-31-2013, 11:50 AM   #7
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the key part is the lower-cost-network. Just exactly does that mean.why would any insurer have a higher-cost-network. seems they would just want a most profitable network
Gerry,
What is being described is called a 'cost-shift.' That occurs when insurance companies/doctors/hospitals participate in government funded/mandated programs. Every business has an administrative cost to its operations. The amount of money a company earns must cover its administrative costs. This is a complex problem to describe: I hope I am successful.

In the case of government and/or mandated plans, the amount of premium (or doctor payment) does not cover the administrative cost. That is why doctors and hospitals are paid a lower fee schedule than with private insurance. That is why some plans will not be offered in the subsidized market.

The flow of patients to a provider or the number of subscribers to an insurance carrier is what determines how much cost-shift any business (insurance plan, clinic, or hospital) can withstand. So, to keep the flow up, these businesses accept lower income, and then they have a plan to increase the higher paying flow of their business. They need these higher income patients/subscribers to cover the manufactured losses from the subsidized plans.

So people in the higher profit plans are actually helping to pay for the subsidized plans. In retail, they call this a 'loss-leader.'

This is no different than what happens today in health insurance or what happened in 2005 or 2009. Today, some doctors do not accept patients who have Medicaid or Medicare. Today, some insurance companies do not participate in government programs (Medicaid, Medicare, Federal Employee Health Plans, etc.) because they take a loss just to provide the service.

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Old 03-31-2013, 12:10 PM   #8
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Gerry,
What is being described is called a 'cost-shift.' That occurs when insurance companies/doctors/hospitals participate in government funded/mandated programs. Every business has an administrative cost to its operations. The amount of money a company earns must cover its administrative costs. This is a complex problem to describe: I hope I am successful.

In the case of government and/or mandated plans, the amount of premium (or doctor payment) does not cover the administrative cost. That is why doctors and hospitals are paid a lower fee schedule than with private insurance. That is why some plans will not be offered in the subsidized market.

The flow of patients to a provider or the number of subscribers to an insurance carrier is what determines how much cost-shift any business (insurance plan, clinic, or hospital) can withstand. So, to keep the flow up, these businesses accept lower income, and then they have a plan to increase the higher paying flow of their business. They need these higher income patients/subscribers to cover the manufactured losses from the subsidized plans.

So people in the higher profit plans are actually helping to pay for the subsidized plans. In retail, they call this a 'loss-leader.'

This is no different than what happens today in health insurance or what happened in 2005 or 2009. Today, some doctors do not accept patients who have Medicaid or Medicare. Today, some insurance companies do not participate in government programs (Medicaid, Medicare, Federal Employee Health Plans, etc.) because they take a loss just to provide the service.

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be careful-your description though accurate got another thread closed when voiced by me using different words
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Old 03-31-2013, 03:55 PM   #9
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My understanding is that most state insurance regulation does not allow cost shifting between policy groups. Some groups are very profitable while others just a little, but insurance companies simply don't offer policies where they don't make money.

Medicare rates may be inadequate for some providers that are able to build sustainable practices based on private pay, but I would be interested in a link that shows it to be a money losing business for the major medical products and slice providers. All the evidence points to it being quite the opposite.
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Old 03-31-2013, 04:04 PM   #10
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Maybe...saying you are losing money and actually losing money are different. Perhaps a practice claims they are losing money by not making a target. Some medical specialties have a lot of medicare patients, and seem to stay in business year after year.

Is it a safe assumption that anyone over 65 is medicare?
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Old 03-31-2013, 04:10 PM   #11
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Is it a safe assumption that anyone over 65 is medicare?
Probably not - many are on Medicaid.
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Old 03-31-2013, 04:24 PM   #12
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Probably not - many are on Medicaid.
Seniors who are eligible for Medicare but can't afford it would be on both, right?
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Old 03-31-2013, 04:31 PM   #13
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Seniors who are eligible for Medicare but can't afford it would be on both, right?
I think they are only on Medicaid: Medicaid Eligibility Guide

EDIT: After additional review of the Eligibility Guide above, it appears Medicaid will pay the Medicare premiums for some individuals over 65.
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Old 03-31-2013, 04:34 PM   #14
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I think they are only on Medicaid: Medicaid Eligibility Guide

this i know from pharmacy. they are dual eligibles. medicare is billed first then excess to medicaid

it is cheaper for medicaid to pay for someone to be on medicare
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Old 03-31-2013, 04:43 PM   #15
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I went to the Medicaid eligibility page for Colorado. No reason, it just came up first on Google. I'm sure all states are different.
HCPF:Medicaid Eligibility for Persons Age 65 and Over

If you are age 65 or older and eligible for Supplemental Security Income (SSI) and/or Old Age Pension (OAP) state supplemental payments you will be eligible for Medicaid.
If you have not applied for SSI you should at a Social Security Administration field office.

  • If you are on SSI and have not been enrolled in Medicaid or if you have not applied for OAP please contact your County Departments Human/Social Services.
  • The income limit is $710.
  • The asset limit for an individual is $2,000 and $3,000 for a couple.

I assume the income limit is per month. I can't fully express how frightening it is to hear that "many" seniors qualify.
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Old 03-31-2013, 07:03 PM   #16
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Really good article. I must say KFF has impressed me as being a really good source of info during the ObamaCare debate.

But this statement pisses me off.
Quote:
Many consumers "will be moving into a really fully insured product for the first time, so there may be a higher cost associated with getting into that market," Health and Human Services Secretary Kathleen Sebelius said this week.

I consider my existing Kaiser plan to be fully insured. I really don't need free contraceptives, or even prescription Viagra, or even the various free tests that are now required. At 338/month it is affordable, I seen estimates that my coverage will go up to over $550/month next year and that starts to move into the unaffordable category.
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