Healthcare Business News
Henry Waxman (D-Calif.)

Democratic analysis questions validity of insurance premium 'rate shock'

By Jonathan Block
Posted: May 20, 2013 - 8:30 pm ET

Where consumers live and their state's previous insurance rules may determine whether they experience “rate shock” this fall in their small business and individual plans.

One of Republicans' key arguments opposing the health reform law has been that its insurance regulations will cause rates to go through the roof.

House Democrats looked at recent insurer filings for 2014 premium rates (PDF) in five states and found that “in many cases, the Affordable Care Act appears to be reducing rates even before tax credits are taken into account.”

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The five states that have released premium rates for next year so far are Maryland, Oregon, Rhode Island, Vermont and Washington state.

“In Oregon, rates for those who stay in comparable plans are expected to fall by up to 11%,” Rep. Henry Waxman (D-Calif.), ranking member on the House Energy & Commerce Committee, said during a hearing on the topic Monday before the Energy and Commerce Committee's Oversight and Investigations Subcommittee. “In Washington, consumers are likely to see average reductions up to 25%.”

A week ago, however, Republicans on the committee released their own report with a different conclusion, conceding that because insurance regulations vary across states, “there will be significant variation in the impact of the Affordable Care Act on a state-by-state basis.”

The Republican staff report released May 13 (PDF), based on queries of 17 insurers in March, found that “nearly all of the information the insurers submitted showed that Americans can expect massive premium increases,” said Rep. Tim Murphy (R-Pa.), chairman of the subcommittee.

One insurer, the report found, said that 45 states and the District of Columbia will experience significant premium increases. Another insurer stated in a letter that the “bottom line is that the (Patient Protection and Affordable Care Act) does not contain many provisions that will reduce costs and improve affordability, especially in the short term.”

One reason for the discrepancy between the reports could be the five states that the Democrats reviewed. Those states have already implemented some of the provisions that the Affordable Care Act requires beginning in 2014, such as a narrower “band” between what a younger, healthier person and an older, sicker person can be charged for premiums. This smaller band, which means younger people generally will pay more than they do now, is one of the primary reasons Republicans have argued the law will boost rates.

Cori Uccello, a senior health fellow at the American Academy of Actuaries who testified at the hearing, said in an interview that states that have such rules in effect before 2014 should see “stable premium changes as subsidies and income tax credits bring in a lower cost population.”

Uccello added, however, that in states where this has not been the case, there could be “upward pressures on premiums.”

Follow Jonathan Block on Twitter: @MHjblock

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