the second opinion

Untangling Obamacare: Rate shock!?

Understanding the direction of insurance premiums is not easy, let alone explaining it. But...
May 1, 2013

Covering Obamacare poses big challenges for journalists, from piercing government spin and deciphering GOP rhetoric to unraveling and simplifying the complexities of insurance. Today we begin a series of posts that aims to help reporters, editors, and the public understand what this law is really about and how it is being implemented.

Will insurance premiums go up, or won’t they? That was a burning question among Beltway types a few weeks back, when Health and Human Services Secretary Kathleen Sebelius admitted that some people buying insurance this fall might indeed find themselves paying higher prices for their coverage. “These folks will be moving into a really fully insured product for the first time, and so there may be a higher cost associated with getting into that market,” she said.

What an admission! During the run-up for the law, the president proclaimed families would save an average of $2,500 on their premiums, and for the last three years the administration’s line has been that the new law would lower insurance rates. Not for everybody, it seems.

Sebelius apparently spilled the beans about something most people who know insurance have said for a long time–that despite the spin from the Secretary and others with a stake in the Affordable Care Act (ACA), the rate question is tricky, and trying to shoehorn the idea of “universal” coverage into a private insurance market might indeed cause some insurance premiums to rise. This is becoming clear in the individual market, which covers some 16 million Americans.

So it’s hardly surprising that the next day, Josh Earnest, the deputy press secretary, seemed to soften her remarks, although he claimed he had not read them. “I would actually point to the results that we’re already seeing from the Affordable Care Act, which is a savings of $2.1 billion, and the analysis from the [Congressional Budget Office] that actually says, in the future, we’re gonna see rates that are lower for higher benefits.”

Huh? That one needs some explanation. For example, generally in health insurance, higher premiums buy better benefits. Was the deputy secretary saying that this has changed, that people will now pay less and get more? Was he referring to Obamacare’s minimum-benefit standards? We’re left to wonder.

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And the media can be forgiven if they were confused. The Hill and The Wall Street Journal waded into the ticket of statements and anti-statements. John Harwood of The New York Times touched on rates in his “Political Memo” column Tuesday, on how thanks to the complexity of implementing it, Obamacare will continue to be a political football.

But for the most part, the media have not considered the topic of rate increases–and decreases–as front-page material. The White House line has been (and remains) that subsidies called for by the ACA will make health insurance more affordable.

Will they? For the last month, studies have raised some important red flags about the affordability of health insurance premiums.

When a study done by the actuarial firm Milliman, for the state of California, found premiums might go up 30 percent on average for high-income people who are currently insured, and who won’t qualify for federal subsidies (although there might be decreases for those with lower incomes), the White House called fears of “rate shock” overblown, saying consumers can move from expensive plans to more efficient, lower-cost plans, a point Jackie Calmes of the Times repeated two weeks ago. Efficient, lower-cost plans? That’s euphemistic shorthand for fewer benefits and more out-of-pocket expenses. Calmes didn’t get into that.

Another red flag, this one about the customer base of the state exchanges that Obamacare puts in place, each one a separate “risk pool,” as insurers put it: A month ago, the Society of Actuaries, a research and professional organization, released a study showing that when sicker people join the new risk pools–a major reason for healthcare reform–the underlying cost of their care (in insurance jargon, “claims costs”) could jump, on average, 32 percent. Those higher costs could translate into higher premiums in the individual market in states like Ohio, Wisconsin, and Indiana. Obamacare supporters questioned ties that some of the researchers had to insurance companies.

And a piece by Kaiser Health News, in collaboration with PoliticoPro, suggested that maybe actuaries–who work for insurance companies, government agencies, and nonprofit organizations–do not always have the public’s best interest in mind, and perhaps need more oversight that the current self-regulation. Still, these blame-the-messenger stories are not all that useful for public understanding of the rate question–perhaps the key to the ACA’s success. Dissecting what is really happening is.

What’s happening right now is that people who have bought policies in the individual market are beginning to get letters from insurance companies advising them of rate increases. Policyholders pinched by these increases are not likely to listen to White House messaging about the ACA reducing healthcare costs or making insurance more affordable.

Before Christmas, Blue Cross Blue Shield of Nebraska warned 80,000 customers in the individual market that their rates were increasing about 10 percent on average, but they could avoid the increase if they increased their deductibles or coinsurance and co-payments. In neighboring Iowa, Susan Voss, the insurance commissioner, approved a 12 to 13 percent increase for Wellmark Blue Cross and Blue Shield earlier this year, affecting 150,000 residents. Voss said the rate hikes were justified and would continue until healthcare costs were under control. Aetna just sent a letter to its individual market customers announcing higher premiums because “costs for services provided by hospitals, doctors, and drug companies have gone up significantly.” The company also cited new fees and taxes imposed on health insurance to help pay for subsidies for the uninsured. “Aetna began adding these taxes and fees to premiums in select states in the first quarter of this year,” the letter said.

In her remarks admitting rate increases would be coming, Sebelius said she is “a believer in the market strategies that will minimize the rate impact.”

Just what are those strategies and what do they mean for people receiving “Dear Customer” letters from their insurers? How do we step back and untangle Insurance company spin, White House spin, and the spin of all the interested parties to help ordinary people find their way to affordable healthcare in a new geography. They need help, and that’s where journalists come in. In subsequent posts, I will try to help sort all this out.

Follow @USProjectCJR for more posts from this author and the rest of the United States Project team.

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Trudy Lieberman is a longtime contributing editor to the Columbia Journalism Review. She is the lead writer for CJR's Covering the Health Care Fight. She also blogs for Health News Review and the Center for Health Journalism. Follow her on Twitter @Trudy_Lieberman.