Health reform’s critics are sounding the alarm: in 2014, they say, health insurance premiums will climb, both for small businesses and for individuals who purchase their own coverage. “Hold onto your hat,” writes Bob Laszewski, editor of Health Care Policy and Market Place Review. “There Will Be Sticker Shock!”
Laszweski’s piece has been cross-posted on popular blogs, and his forecasts have been popping up in mainstream newspapers, including USA Today. Such wide circulation makes Laszewski’s warnings worthy of attention, and compels me to ask an important, if impertinent, question: Is what he says true?
Cherry-picking a CBO report
The Congressional Budget Office expects that the ACA will have a “negligible” effect on the premiums that large employers pay for insurance, and most experts agree. But in the individual market, Laszewski claims that CBO projections show “10% to 13% premium increases.”
Here is what the CBO actually said:
“About 57 percent of people buying [their own] insurance would receive subsidies via the new insurance exchanges, and those subsidies, on average, would cover nearly two-thirds of the total premium.
“Thus, the amount that subsidized enrollees would pay would be roughly 56 percent to 59 percent lower, on average, than the premiums charged under current law.”
Wait a minute: “56 to 59 percent lower?” Where does Laszweski get “10 percent to 13 percent higher?
In the next paragraph CBO adds: “Among … enrollees who would Not receive subsidies, premiums would increase by somewhat less than 10 percent to 13 percent.”
An insurance-industry-executive-turned-consultant, Laszewski,cherry-picks the paragraphs he quotes, and doesn’t factor in the subsidies. He does mention their existence, but only in passing: “All of these differences in premiums would be before income-based federal subsidies.” He also doesn’t admit how much of the premium the average subsidy would cover – or how many would benefit.
But Laszewski doesn’t pause to do the arithmetic.
Instead, he throws out numbers based on conversations with unnamed insurance industry sources: “Expect individual health insurance rates for people in their 20s and early 30s to about double,” he warns. If you work for a small company, he asserts, “look for baseline increase of 10% to 20%.”
Recently, Laszwleksi updated his post, quoting Mark Bertolini, CEO of Aetna, who also predicts that “Health insurance premiums may … double for some small businesses and individual buyers.” On average … premiums will rise “25 percent to 50 percent.”
“I expect more health insurers to be echoing the Aetna comments” Laszewski adds. “There is a real concern in the industry they need to get out ahead of this telling people why rates are shooting up …”
Of course, insurers hope to persuade us that rate hikes are inevitable – while placing the blame on the ACA.
But the truth is that subsidies are only one reason why both individuals buying their own insurance and employees of small companies are likely to find insurance more affordable in 2014. Insurers’ administrative costs will be significantly lower both in the Exchanges where individuals will shop and in the separate Exchanges where small business owners will purchase insurance for their employees. In addition, there is every reason to expect that an influx of relatively healthy 20-somethings and 30-somethings will be getting into the pool–and lowering premiums for everyone.
To find out why, read the rest of this post on Healthinsurance.org. If you would like to comment, come back to HealthBeat, and I’ll answer your comments here.