How Much Will You Pay for Health Care in 2015? What You Need to Know About Healthcare Inflation-Part 1

 

Probably you have seen headlines like this one: “O-Care premiums to skyrocket.”

The warning, which was posted on The Hill, seemed designed to cheer conservatives distraught by Obamcare’s enrollment numbers. It began by announcing that next year, “premiums will double in some parts of the country. The sticker shock will likely bolster the GOP’s prospects in November and hamper ObamaCare insurance enrollment efforts in 2015.”

Where did the reporter get her information?  The story is based on interviews with “health insurance officials.”

Why would they issue such dire predictions? Perhaps they are trying to soften us up so that when insurance rates rise by “only” 7% to 10%, we’ll be surprised and grateful? (This is just a thought.)

The truth is that there is absolutely no reason to believe the same old, same old, fear-mongers who claim that in 2015, rates will spiral “by 200% to 300%.”

But what about those who predict double-digit hikes?  Wellpoint, the biggest commercial insurer in the Exchanges, recently told Bloomberg that it may ask for “double-digit plus” increases when it proposes 2015 rates sometime next month.

Wellpoint can propose whatever it wishes, but I very much doubt that state regulators would accept such stiff increases. A combination of regulation and competition will keep a lid on premiums both in the Exchanges, and off-Exchange, just as it did this year.

My guess is that, in most states, rates will rise by no more than 2% to 4%. Meanwhile, government subsidies will climb to cover those increases for most who buy policies inside the Exchanges. (This year 80% of shoppers who purchased insurance in the state marketplaces received tax credits to help with premiums.) Folks who purchase coverage off-Exchange won’t receive subsidies, but carriers selling policies to individuals outside the government’s online marketplaces will have to compete with prices inside the Exchanges.

Why am I so optimistic?

The Underlying Cost of Medical Care Is Slowing

Americans have become so accustomed to hearing about “runaway health care inflation” that most do not realize that we have finally “broken the curve” of rising health care costs.

Granted, for most of this century, rates soared: “From 2000 to 2009, health insurance  premiums climbed 84%,” Zeke Emanuel, a former White House healthcare adviser and author of Reinventing American Healthcare: How the Affordable Care Act Will Improve Our Terribly Complex, Blatantly Unjust, Outrageously Expensive, Grossly Inefficient, Error Prone System., recently told NBC’s “Meet the Press.”

By contrast, “for the past three years, health care cost growth has dramatically slowed and is just about even with growth in the economy. Some of this is due to lingering effects of the recession in 2008,” he added. “But a part of it is undoubtedly due to the ACA.”

Drew Altman, president of the Kaiser Family Foundation, points out that, despite the aging of the population, ”the Congressional Budget Office projects that Medicare will cost significantly less in the future than previously thought,in part because of the ACA’s changes to Medicare’s payments. “  (As I have explained, those cuts do not reduce benefits, but they do force hospitals to cut waste and provide better value for our Medicare dollars.

Both in the public sector and in the private sector, “Overall health spending is growing at the slowest rate in 50 years,” Altman observes,  (dating back to when the government first started tabulating health expenditures.)”

“The key for the future is not to eradicate premium increases entirely,” Emanuel adds. The goal “is to make sure [that these increases] aren’t Excessive.”

He stresses that there is still much to be done to rein in healthcare spending. But for the moment “the exchanges are stable,” says Emanuel. “Premiums are likely to rise a little but not excessively.”

If you don’t believe Emanuel and Altman, take a look at the graph below, comparing outlays for all medical services (the orange line) to the PCE (personal consumption expenditures–the blue line) from 2009 to 2014. As you can see annual spending on healthcare services is now growing by well under 1% a year. (For a larger version of the graph, click on the link above.)

ifi0rzbQK9cU   bloomberg chart

Bloomberg News used the graph earlier this week, to illustrate a story that lays out some critical and little-known facts:

Prices “for medical services, which make up the biggest share of health care costs, have eased in the past two years. From February 2013 to February 2014 physician fees edged up just “0.2 percent–down from a 1.6 percent rise 2012,” Bloomberg reported, and “the cost of nursing home care rose by only 0.3 percent,” compared with “1.8 percent two years earlier.”

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Obamacare “Horror Stories”–Who Are These People? How Many of These Stories Are True? Part 1

No doubt you have seen or read stories about innocent Americans who have become casualties of Obamacare. The law that was supposed to help middle-class families is now asking them to pay unreasonable premiums and sky-high deductibles. In many cases, they had perfectly good coverage that has been cancelled because it didn’t meet the Affordable Care Act’s (ACA’s) “standards.”

Trouble is, some of these anecdotes  just aren’t true. When an unbiased  reporter begins to make some phone calls, they start to fall apart.

Nevertheless,  these tales of Americans harmed by Obamacare  are being promoted by various conservative groups–including the Republican National Committee.  An internal RNC memo provides advice on how to collect stories of “victims” and feed them to the press.

Knowing this, when I read the horror stories,  I can’t  help but wonder: have the folks who are quoted checked prices on their Exchange?  Do they know  whether they are eligible for government subsidies?   How many didn’t  even try to find out because they just don’t like the ACA?  Who are these people who step forward to  identify themselves victims of the trainwreck called Obmacare? Where did they come from? How did the reporters who wrote the stories find them?

Finally, and perhaps most importantly, are journalists  fact checking their tales? How many are just writing down whatever their sources tell them?

          A Young Mother Suffering From MS Searches For Insurance

A few weeks ago, I stumbled upon a story that ran in the Fort Worth Star Telegram on November 26. The lead is compelling:

“Whitney Johnson, an Arlington 26-year-old with multiple sclerosis, can’t afford to go without health insurance. Her life depends on it.

She gave birth to her first child Sept. 2 after undergoing a series of rigorous steroid treatments, surgeries and a plasma exchange that saved her life. She pays $325 a month for an individual insurance plan – a drop in the bucket compared with the cost of her plasma protein replacement therapy, which runs $40,000 a pop. She undergoes treatment every five weeks.

But now, with the Affordable Care Act in full swing, Johnson’s insurance is under threat.. . .

Recently, the story  explains, Johnson’s insurer sent her a letter saying that because her policy “does not comply with Obamacare” it will be cancelled Jan. 1, 2014. Initially she hoped that she might shift to her husband’s employer-based health plan  For $325 a month, it covers him and their son. But it  turns out that if Whitney were added the policy, their premium would triple.

Meanwhile, she “has been unable to access the federal health exchange website” the newspaper reports, “which has been hampered by technical problems.”

In a video talking about her experience,  Johnson claims  that when she began “trying to shop around ‘ outside the Exchange, “the rates went from $1,000 to $1,800 a month for not even close to the coverage that my previous  insurance had offered me.”

This is when I knew that there was something very wrong with Johnson’s story.

                        $1000 a Month To Insure a 26-Year- Old ???

Anyone who knows anything about Obamacare would realize that under the ACA, no 26-year-old would be asked to pay $12,000 a year – even if she had MS. Obamacare does not let insurers charge more because a customer suffers from a pre-existing condition. This rule applies to all new policies, whether they are sold inside or outside the exchanges.

And Johnson is just 26. In most exchanges, 20-somethings pay far less than older Americans.  I was certain that that she could get a much better deal. It didn’t take me long to find one.

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HHS Announces How Much Insurance Will Cost in 36 State Exchanges

These are the numbers we have been waiting for. This week the Department of Health and Human Services (HHS) published a report revealing what insurers will be allowed to charge in the largest cities in 36 states, when selling policies Americans buying their own coverage in the state “Exchanges.” The report also shows the size of the subsidies that Exchange shoppers  will receive. Previously, we had hard numbers for only 14 states.

In addition, HHS announced averaged premiums, state-wide, for Bronze and Silver plans in those 36 states. (We will be getting more information on rates in other cities very soon.)

Fear-mongers should blush.

It turns out that, on average, rates are 16% below the Congressional Budget Office’s projection—and that is BEFORE factoring in the subsidies.

I found what the report has to say about premiums in Texas particularly interesting. Many observers had suggested that while rates in the Blue States might be surprisingly low, Red States would let carriers charge far more.

I’ve written about the report—and the media’s reaction to it—here on healthinsurance.org. 

You can comment there, or return here to comment.

If you use Facebook, you may want to put a link on your Facebook page. More people need to hear the facts about Obamacare.

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Reverse “Sticker Shock” Part 2 –Subsidies Mean Enormous Saving for Older Americans

In the past I have written about how government tax credits will help young adults (18-34) who must buy their own coverage because they don’t have access to “affordable, comprehensive” employer-sponsored coverage.

But older Americans forced to purchase their own insurance will save even more. Precisely because a 50-year-old’s premiums may be three times higher than a 20-year-old’s, his subsidies will be larger.

Subsidies are designed to fill the gap between the percentage of your income that you are expected to contribute toward the cost of a premium (with the government assuming that if you earn more, you can spend more on health insurance) and the actual rates that insurers in your market charge for a benchmark Silver plan..

Families USA estimates that while the majority of 18-34 year olds shopping in the Exchanges will qualify for help from the government, fully  30% of the those who receive tax credits  will be 35 to 54, and 12.5% will be 55 or older.

Note that younger Americans will not be subsidizing these tax credits  for their elders. Under the Affordable Care Act subsidies are funded by device-makers, drug-makers, hospitals—plus taxpayers earning over $200,000—and couples earning over $250,000) Very few twenty-somethings are that fortunate. A New KFF Report Offers Eye-Opening Final Numbers on Premiums and Subsidies for 40 –Year Olds and 60-Year-Olds in 17 States

In  August the Kaiser Family Foundation  (KFF) published an “Early Look at Premiums” in California, Colorado, Connecticut, DC, Indianapolis, Maryland, Maine, Montana, Nebraska, New Mexico, New York, Ohio, Oregon, Rhode Island, South Dakota, Virginia, Vermont and the state of Washington.

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Reverse “Sticker Shock”—Why are Insurance Rates in the State Marketplaces Lower Than Expected? — Part I

 

Even Forbes’ columnist Avik Roy is recanting.  Earlier this month he acknowledged that under Obamacare, many Americans who buy their own coverage in 2014 will find that insurance is significantly more affordable than it was in the past:  “Three states will see meaningful declines in rates: Colorado (34 percent), Ohio (30 percent), and New York (27 percent).”

Colorado, Ohio and New York are not unique. As states announce the prices that carriers will be charging in the online marketplaces (or “Exchanges”) where Americans who don’t have health benefits rate at work will be purchasing their own coverage, jaws are dropping. Rates are coming down, not only for those individuals, but for some small business owners who will be buying insurance for their employees in separate SHOP (Small Business Health Options Program) Exchanges.

What may be most surprising is that premiums will be lower, not only in liberal Blue states but in some Red states that are opposed to Obamacare.

What is making health insurance more affordable?

First, the majority of individuals shopping in the Exchanges will be eligible for government subsidies that will go a long way toward covering premiums. In the past I have written about how these tax credits will help young adults (18-34).  But older Americans also will benefit. Fully 30% of those who receive tax credits will be 35-54, and 12.5% will be 55 or older.  This is important because in the Exchanges, insurers  in every state except New York and Vermont will be allowed to charge a 60-year-old three times as much as they would charge a 20-year-old for exactly the same policy.  Without subsidies many would find insurance totally unaffordable.

The second reason premiums are significantly lower than expected is that as I have explained on healthinsurance.org  in the state marketplaces insurers are forced to compete on price. All policies sold in the Exchanges must cover the same essential benefits, and follow other rules that will make the plans look very much alike. The only way for a carrier to distinguish himself from the crowd will be to charge less—or have a better network of providers. But the younger customers that carriers covet care far more about price than about the network.

Third, in many cases, state regulators have been clamping down. In Portland Oregon, for example, regulators forced insurers to cut their proposed rates by an average of nearly 10%. Three of the 12 insurance companies in that market had to lower their rates by more than 20% f

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Under Obamacare, Will You Receive a Subsidy to Help You Buy Your Own Insurance? We Now Have Real Numbers That Will Let You Calculate How Much You Will Receive

 

Note to Readers: A longer version of this post appeared yesterday on HealthInsurance.org.

Up until now, when Obamacare’s supporters and reform’s opponents squabbled over what insurance will cost in 2014, they had to rely on estimates and national averages. But now we have real numbers.

Eleven states have announced the rates that insurers will be charging in their Exchanges-marketplaces where individuals who don’t have employer-sponsored coverage can shop for their own insurance.

Subsidies Will Be Based On the Cost Of A Silver Plan Where You Live,

Middle-income as well as low-income people buying coverage in the Exchanges will be eligible for government subsidies that will come in the form of tax credits. Anyone earning between 100 and 400 percent of the federal poverty level (FPL) (now $11,490 to $45,960 for a single person, and up to $126, 360 for a family of six) will qualify.

Most people who are forced to buy their own insurance earn less than 400% of FPL. More affluent Americans usually work  for companies that offer comprehensive coverage.

The graph below shows average Silver plan rates in the eleven states that have disclosed premiums. (Note that these are only state averages. Premiums vary widely within a state: In some cities and counties silver plan rates will be much lower, even before you apply the subsidy.

Silver plan premiums

It’s worth noting that in these 11 states the least expensive Silver Plan costs 18% less than the non-partisan Congressional Budget Office projected last year. 
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If You Buy Your Own Insurance in the Exchanges, Will You Receive a Government Subsidy? How Much Will it Be for Couple, or a Family of Five?

ACA tax credits

 

 

 

 

 

 

Source:

No doubt you have read that if you are single, and earn less than 400% of the Federal Poverty threshhold (roughly $46,000 for an individual or $94,200 for a family of four) you will be eligible for a tax credit to help you cover the cost of insurance premiums.

But most of us don’t fit into one of those two categories. What if you are a couple, or a family of three? What happens if you have four kids?.

As the table above reveals, if a couple has  four children  and earns less  than $126,360 (400% of the FPL), they will be elibigle for the tax credits. Note: these credits are available only if you are self-employed, unemployed, or work for a company that does not offer affordable, comprehensive insurance. “Affordable” is defined as individual coverage that costs less than  9.5% of your income.

The credits are designed to make sure that no one who purchases their own insurance is forced to spend more than 9.5% of their income on health care. For instance, according to the Kaiser Family Foundation’s (KFF’s) new subsidy calculator, coverage for a 35-year-old couple with three children might cost $13,101./(This is an estimate; actual premiums will vary depending on where you live. Healthcare is much more expensive in some states than in others. ) If the parents earned roughly $100,000 a year, they would be asked to pay $9,500 toward their insurance and would receive a tax credit of $3,626.

This assumes that they purchase a “silver plan” which pays for an average of 70% of covered benefits. The family would owe the other 30% in  the form co-pays and deductibles. But keep in mind that preventive care is free, there are no co-pays and the deductible does not apply.

Assuming they need care other than preventive care, total out-of-pocket spending would be capped at $12,750, even if the entire family wound up in a car accident, three of them were hospitalized, and two needed surgery.

If they preferred, the family could purchase a less expensive Bronze plan which would pay for 60% of covered benefits. Their co-pays and deductible would be higher, but once again, preventive care would be free, total cost sharing still would be capped at $12,700, and the premium for a Bronze plan would be lower: KFF estimates that a family of five earning $100,00 would still receive a subsidy of $3,626 and their share of the premium would be just $7,253.

Why is the Government Subsidizing Households That Earn more than $125,000?

 If people choose to have four children, that certainly is their business. But why should I help pay for their healthcare?

The answer is two-fold:

First, people don’t necessarily choose to have 4 children –or more. Some couples are surprised (not to mention overwhelmed) when they disccover that they are having twins or triplets. 

Secondly as a society, we care about children. We don’t want any child to go without needed care.

But there also is a pragmatic reason for supporting large families. If those children don’t receive preventive care such as dental checks as well as  timely treatments when they are sick, down the road, we as a society will pay the price. The health of the population will play a major role in determining how productive we, as a nation, are.  

 

 

 

 

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Who is Douglas Holtz-Eakin and why is he saying such terrible things about health reform?

Today, the House Energy and Commerce Committee’s Subcommittee on Health will hold a hearing entitled: Unaffordable: Impact of Obamacare on Americans’ Health Insurance.  (Always nice to know that our elected representatives are keeping an open mind.)

Prominent on the list of witnesses: “Douglas Holtz-Eakin.” Even before reading his testimony, I knew what Holtz-Eakin would say: young, health Americans should brace for “sticker shock.”  Conservatives like Holtz-Eakin tend to stay on script. However stale the rhetoric, they firmly believe that if you repeat a sound-bite often enough, people will believe it.                                     

                                        Who is Douglas Holtz-Eakin?

If you recognize the name, it’s probably because Holtz-Eakin has become a familiar figure in the mainstream media, quoted in the New York Times, writing Op-eds for Reuters and Politico.com, and appearing, not only on Fox Business News, but on CNN and the PBS’ Newshour.

Alternatively, “Holtz-Eakin” may ring a bell because he served as a member of George W. Bush’s Council of Economic Advisers (CEA), and as Director of Bush’s Congressional Budget Office (CBO.)

In a remarkably candid 2011 interview, Holtz Eakin recalled his tour in the Bush administration:

“Going into the summer of 2001, things were getting worse. . . When we first went in and talked to the President, Glenn [Hubbard] and Larry Lindsey said, ‘Mr. President . . . We’re probably not going to run a surplus on budget.  We’re going to run a deficit.”

Bush’s reply: “We’re not going to run a deficit. If you come in here with a deficit, you’re both fired. Go fix it.’”

We ended up running a budget surplus of one billion dollars,” Holtz-Eakin confided, “driven by gimmicks of remarkable proportions.”
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Why Is It That the Truth Never Goes Viral?–A Campaign of Misinformation Unites Conservative Activists and Insurers

The Post below originally appeared on Healthinsurance.org (mm)

Wild rumors, such as the one claiming Obamacare premiums will start at $20,000 a year for a family of five, are much jucier than the truth.

About a week ago, Investor Daily’s website published a “Fact-Check” post that illustrates how misinformation spreads.

In the post, Jed Graham explains that when the IRS published a final rule about penalties under the Affordable Care Act (ACA), it included a few hypotheticals. For example, the IRS wrote, “The annual national average bronze plan premium for a family of 5 (2 adults, 3 children) is $20,000′ in 2016.”

The $20,000 figure was just an example, Graham explains. “The IRS always uses hypothetical numerical examples in its regulations to illustrate how the rules will work in practice and this was no different.”

Nevertheless, before long, the “conservative news site CNSNews.com began to blare out this shocking headline: ‘IRS: Cheapest Obama Care Plan Will Be $20,000 Per Family.’”

From there, “the ‘fact’ got picked up by countless media outlets and pundits” Graham reports, “most of them on the right,” including:

 •Betsy McCaughey writing for the New York Post;

Rush Limbaugh;

•Breitbart

•On the left, even Naked Capitalism (a well-researched blog,) reported the news bulletin from CNSNews.com.

This is the problem: Once a faux-fact gets out there, even reporters who have no axe to grind continue to repeat it. If you see the number often enough, you assume it must be true.

How could a reporter tell that $20,000 wasn’t an IRS estimate?

It should have been clear that this was a hypothetical, Graham points out, if you just looked at other hypotheticals in the IRS ruling. “For example: ‘the annual national average bronze plan premium for a family of 4 (1 adult, 3 children) is $18,000.’

“Both examples can’t be true,” he observes, “unless an adult’s premium is $2,000 and a child’s is $5,333.”
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Ignore the Hype: Why Health Insurance Premiums Won’t Skyrocket in 2014

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?

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