State determines individual ins. premiums

March 28, 2013 at 12:09 AM
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SCHAUMBURG, Ill., March 27 (UPI) -- The premiums of U.S. workers who buy their own health insurance will either go up or down depending on the state in which they live, actuaries estimate.

"The model involved price, income levels and state underwriting regulations among other variables to try to determine who the new market for individual health insurance plans would be -- currently, nationwide, there are about 12 million workers who buy an individual health insurance plan because their employer doesn't not provide any health coverage," Kristi Bohn of the Society of Actuaries told United Press International.

"The model suggested the number of people who buy individual health insurance plans would increase to 25 million -- more than double, but we don't really know who these new people are."

The report, sponsored by the Society of Actuaries, estimated the premiums of those whose employers don't provide health insurance and buy an individual healthcare plan themselves could increase by 32 percent on average nationwide within the next three years, but the estimates did not reflect the federal subsidies available to some small businesses and to low-income individuals in the form of tax credits, Bohn said.

Each state has a different set of underwriting rules, different geographies and different levels of underwriting.

The Affordable Care Act's affect on premiums was not part of the model, but long-term relative claims cost were. Many aspects of the healthcare reform legislation will affect premiums, including changing benefit designs, new taxes and assessments, federal risk mitigation programs, minimum loss ratio rules -- the amount of overhead for insurance companies is restricted -- and premium subsidies by the government for those with low incomes.

"We were surprised by the amount of differences among the states, they were all very different and their past experiences, their underwriting rules, healthcare programs, Medicaid all affect the premiums of the individual health insurance plans," Bohn said. "For example, some states have complex applications for individual health insurance that might not allow a pre-existing condition so a person might have been turned down for a policy in the past but now that person will be allowed to enter the health insurance market because of the Affordable Care Act."

The more people within a state who had been shut out of the individual health insurance market before because of a pre-existing condition, or an illness, the more this pool of high-risk insurers will affect the individual plan's premium.

"For example, Vermont -- an early adopter of healthcare for all of its residents -- already experienced the pricing decisions, the changes in the market, the inclusion of the high-risk pool so in our study Vermont's premiums were estimated to decrease about 12.5 percent -- and healthier young people will be added to the pool lowering premiums," Bohn said.

After a period of studying the options and planning, in 2011, Vermont enacted a law establishing the first state-level single-payer healthcare system in the United States. New York is estimated to have its premiums lowered by about 14 percent and Massachusetts' premiums were estimated to drop about 12.8 percent, the report said.

However, the study estimated the individual premiums in both Wisconsin and Ohio would increase at the end of three years by 80 percent.

"Ohio is ending with increased premiums, but is starting from lower premiums and costs to begin with -- so despite the increase, the premium estimate is still lower than national average," Bohn said.

The model assumed all of the parts of the Affordable Care Act would be enacted, including expanded Medicaid, but many states have said they would not expand Medicaid, so that will have an impact on the individual premiums as well, Bohn said.

"Remember, this study has nothing to do with employer-provided health insurance plans, this report involved the individual plans, paid by the individuals and those who do not have health insurance currently," Bohn said.

The model was also limited in what it examined. Parts of the Affordable Care Act were not included such as programs that limit insurers' risk in taking on sicker people, improvements in care delivery which will lower costs and the effect of more competition among healthcare plans that should all lower the cost of coverage and lower the price of premiums.

The report, released Wednesday created a bit of a stir, because many mistakenly thought the increases in premiums involved those who currently get their health insurance as a benefit of their employment that is paid by the employer.

"The healthcare law will bring down costs and save money for young people and families," Kathleen Sebelius, secretary of the U.S. Health and Human Services, said in a statement. "It's misleading to look at only some of the provisions of the law because, taken together, the law will reduce costs."

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