As First Year Of Health Insurance Mandate Nears, Prices Could Shock Connecticut Buyers
http://www.courant.com/business/hc-haar-health-exchange-prices-20130226,0,2843443.storyDan Haar
4:44 p.m. EST, March 2, 2013
Thousands of Connecticut residents will have a shock this summer when they see the prices for 2014 medical coverage that they’re counting on buying through the newly formed state health insurance exchange.
You might have thought that even though prices are expected to rise sharply across the nation in the state exchanges — which are part of health care reform — Connecticut buyers would get off easy. After all, this state already has many of the coverage mandates driving up rates elsewhere.
Wrong. If you’re an individual or a small business hoping to benefit from the public exchange, which launched a user-friendly web site and took the name Access Health CT this month, you’ll find prices significantly higher than rates for 2013, experts say.
How much higher? No one can say for sure as the plans shape up. Ovation Benefits in Farmington predicts that Connecticut rates for small business group plans will be 20 percent to 25 percent higher than this year’s rates, compared with a jump averaging 35 percent across the nation, said Brian Driscoll, the firm’s chief operating officer.
Individual plans, already thousands of dollars per year, could double in price from this year across the nation, Ovation predicts — and the company will not make a guess for Connecticut.
Ovation and West Hartford-based BlumShapiro have combined forces to prepare clients for the new rules, but people are only now waking up to the reality of health reform math — ugly numbers caused by new rules, new fees and old pressures on medical costs.
"We’ve been pretty much telling people for the last couple of years that this was coming," said Andrew Lattimer, a partner at BlumShapiro, an accounting, management and tax consultancy. "Come summertime it’s going to get a lot more traction."
And although there is disagreement about many aspects of health reform, on this issue, everyone sees the same result: higher prices in Connecticut. At least six companies are expected to compete — Aetna, UnitedHealthCare, ConnectiCare, Anthem Blue Cross & Blue Shield and two new entrants, Healthy CT, a non-profit group of providers, and Harvard Pilgrim. Cigna offers plans in the state but has not indicated that it will participate in the exchange.
Young Adults
Price hikes will be especially steep for people in their 20s and 30s who need health coverage to comply with Obamacare, but who don’t get it through their employers, Driscoll said. That’s because the current Connecticut rule allows insurers to charge six times more for the oldest people than for the youngest, who are typically healthier — and the new rules let companies charge just three times more for the oldest people.
“We’re going to see price differences play out measurably, significantly for the younger population,” Driscoll said.
The health exchanges are online marketplaces designed to make it easy for businesses and individuals to compare prices and buy coverage in standardized health plans, which will come in four types: bronze, silver, gold and platinum. Although exchanges in some places will actually buy coverage and resell it to customers, potentially keeping price increases down, Access Health CT is not doing that, at least in 2014.
The agency has not estimated prices for 2014 plans.
"There are just guesses all over the place, from 10 to 20 percent all the way to 100 percent," said Access Health CT spokesman Jason Madrak. "It’s still too early to know where we’re going to land."
But he added, "There will definitely be increases."
Buyers who qualify will get subsidies for insurance bought through the exchange. Low-income households at 138 percent of the poverty rate — about $25,000 for a family of three — will pay no more than 2 percent of their income for insurance, and families up to 4 times the poverty rate, or $72,000 for three people, will pay no more than 9 percent.
Small businesses that employ lower-wage people will receive tax credits as a subsidy.
But those plans may only cover 60 percent of medical costs, on average. Richer plans will cost more. and, of course, the subsidies are paid for by taxpayers and insurance buyers through taxes and fees.
Insurers, who will file rates with the state Insurance Department later this year, have not given specific numbers but have been warning for years that the rules of the health reform act, which was adopted by Congress and signed by President Obama in March, 2010, will mean significantly higher rates.
That could undercut what is arguably the main point of the whole health reform — dramatically reducing the number of uninsured Americans from an estimated 47 million people. Although the law says everyone must be insured by 2014, the penalty is just $95 in the first year, rising to $695 by 2016, leading to fears that many healthy people will swallow the penalty rather than buying higher-priced coverage.
That would mean the risk pools would not benefit as much from healthy people who use scant medical coverage, which, would create yet more upward pressure on rates.
"The insurers are worried about it, regulators are worried about it, the exchange folks are worried about it," said Keith Stover, who represents health insurers in Connecticut. "Anybody that has done any thinking about this is really worried about what the rate impact is."
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The reasons for the higher prices are at the core of the legal and political back-and-forth that has shaped the landmark Patient Protection and Affordable Care Act of 2010, which was affirmed last June by the U.S. Supreme Court.
First of all, coverage requirements are increased, which means — on the bright side — that benefits are richer for people who buy insurance. More services are likely to be covered, and a higher percentage of costs are covered, as many individual plans today pay half or less of all medical expenses, on average.
Also, several of the ways insurers have limited coverage are now going away, chiefly the exclusion of people with so-called pre-existing medical conditions. That means anyone can get coverage, but, naturally, it comes at a cost to those now in the risk pools.
Moreover, as Republicans in Congress have wasted no opportunity pointing out, not only are taxes rising to pay for subsidies to help people buy insurance, but fees are also going up for the plans businesses and individuals buy through exchanges such as Health Access CT. Those fees will account for 5 percent to 10 percent of the increased prices, Driscoll said.
Finally, on top of these new pressures on prices, Driscoll — whose firm works with companies that have employees nationwide — forecasts another year of double-digit medical inflation.
Defenders of the new system say the market will eventually bring prices down by fostering a healthier population that seeks and receives more preventive care. Skeptics say even the basic goal of lowering the number of uninsured people might not be met, as some small companies with fewer than 50 people that now offer health insurance stop doing so.
Any company with 50 or more people must offer coverage, or face stiff fines.
What will happen? "The private sector will begin to get very creative about how to respond to these regulations," Driscoll said.
That means cutting hours below the 30-hour-a-week threshold that qualifies a worker for coverage, and keeping payrolls below 50 people. On a recent conference call of BlumShapiro clients, one business owner asked whether he could split his workforce of 50-plus into two smaller units.
"No, they look at the controlled group," Driscoll said, meaning that if the units are controlled by one person or group and have other common traits, they are one firm.
Insurers, Driscoll said, "are going to have to start shrinking the networks of doctors." And, he added, more small companies will become self-insured, taking on their own insurance risk the way larger companies now do. That will cut into the fees that are needed to pay the subsidies.
Connecticut's Coverage Mandates
It’s a swirl of hard-to-predict forces but there’s one thing the state can do to control price increases.
Connecticut has some wiggle room in one area that’s always a political hot potato, coverage mandates. This state has among the richer sets of requirements, but the number of new mandates has slowed to a trickle in recent years. This year, federal rules require taxpayers, not insurance companies, to cover the cost of new mandates.
There is a proposal for coverage of certain types of treatment of a rare autoimmune disease in children, said Sen. Joseph Crisco, who is co-chair of the General Assembly’s insurance committee. But it’s unclear whether that would constitute a new mandate.
Crisco believes many of the state requirements lead to lower costs in the long-run. "No one ever talks about the out years in a mandate," he said.
Regardless, if ever there was a year for Connecticut to put a lid on that impulse, this is it. On the other hand, some people want the legislature to roll back existing mandates — which makes health care advocates a bit nervous, trading price for coverage.
"We have to have a grownup conversation," said Ellen Andrews, executive director of the Connecticut Health Policy Project, "Rather than just slash and burn."
Copyright © 2013, The Hartford Courant
