Insurance subsidies, cost-sharing mechanisms and provisions designed to slow the growth of health care costs are housed in the Affordable Care Act, but how they work together remains to be seen, and a House subcommittee’s investigative hearing Monday came no closer to drawing a definitive answer.
“Nearly all of the material the insurers submitted (to this committee) showed that Americans can expect massive premium increases,” said Rep. Tim Murphy, R-Pa., chairman of the Subcommittee on Oversight and Investigations. “As one insurer told the committee, consumers in 90 percent of all states would likely face significant premium increases.”
The Affordable Care Act establishes more comprehensive benefits by creating a baseline plan that offers essential health benefits and requiring plans to offer free preventive services.
“Plan generosity may increase due to essential health benefit and actuarial value requirements, thus increasing premiums, but lowering out-of-pocket costs,” said Cori Uccello, a health fellow at the American Academy of Actuaries, in her testimony.
The lists of services health insurance plans must cover include costs for prescription drugs, maternity and newborn care, hospitalization and mental health services.
The preventive care procedures covered are also extensive. They include screenings for blood pressure, cholesterol and HIV, among other things, as well as mammograms and cervical cancer screenings for women.
Colorado Rep. Diana DeGette, the top Democrat on the committee, pointed out that increasing premiums are nothing new, adding that states have started using “rate review tools” aimed at bending health care’s cost curve.
“And I would point out (to) those who are complaining that insurance rates are still rising in some areas,” she said, “need to look at how much they’ve been rising in the last 10 or 15 years in this country.”
Costs could also rise because insurers must accept all applicants now; individuals can no longer be turned away for pre-existing or dropped from their plan when they fall ill. With more sick individuals in the insurance market, the costs of treatment to insurer will increase.
The individual mandate, which requires most Americans to have insurance or pay a penalty, and tax credits for insurance premiums “provide incentives for individuals in good health to obtain coverage, mitigating premium increases due to guaranteed (coverage),” Uccello said.
The tax credits are available to those who shop for insurance in the new state-based exchanges, which open for enrollment on Oct. 1. Individuals and families with household incomes of up to 400 percent of the federal poverty line are eligible.
The law also establishes a definition of what constitutes “affordable” — most households will not pay more than 9.5 percent of their income toward their insurance premium.
But a little-known regulation could blunt the intentions of this provision: employers are allowed to provide coverage at an “affordable rate” to only its employees but could offer coverage to families at higher rates.
“It is based on employee-only coverage,” said Elise Gould, a health care economist at the liberal-leaning Economic Policy Institute. “It says nothing about what it means to offer an affordable family health-insurance policy.”
Employers already often offer health insurance to employees’ families as well as their workers. So it is unlikely businesses will start taking families off their plans, she said.
“So if we move into a world where there is this affordability standard,” Gould said, “there’s nothing sort of on economic grounds that would suggest that they would drop family coverage or offer less generous family coverage.”
But if it should happen to an employee, the rest of the family would not be eligible to enter exchanges and receive subsidies to buy coverage there.