Health Care Law Will Raise Some Premiums, Study SaysWASHINGTON — A study commissioned by the State of California says that the new federal health care law will drive up individual insurance premiums, but that subsidies will offset most of the increase for low-income people.
WASHINGTON — A study commissioned by the State of California says that the new federal health care law will drive up individual insurance premiums, but that subsidies will offset most of the increase for low-income people.
The study, issued Thursday in the midst of a growing national debate over the impact of the law, is significant because California is far ahead of most states in setting up a competitive marketplace, or exchange, where people can buy insurance this fall.
Premiums could increase by an average of 30 percent for higher-income people in California who are now insured and do not qualify for federal insurance subsidies, the study said.
However, it said, people in this group will benefit from new limits on their out-of-pocket medical expenses, so their total cost of care will increase by 20 percent, on average.
The report for the state insurance exchange, known as Covered California, cited several factors contributing to higher premiums: an influx of less healthy people into the individual insurance market, and a requirement for health insurance plans to offer richer benefits and to cover more of the cost of care than is now typical for individual insurance policies.
Another factor, it said, is that federal and state government agencies are imposing new taxes and fees on insurers, which are likely to pass on some of the costs to consumers.
“Health insurance will become relatively less expensive for people with chronic conditions and relatively more expensive for healthier people,” said Robert G. Cosway, an actuary at Milliman, a large consulting firm that prepared the report.
Some people, especially those in good health, may drop their insurance because of the premium increases, Mr. Cosway said.
However, the study said that low-income people would see significant reductions in their premiums and out-of-pocket costs, in part because of income tax credits and other subsidies. The total cost of care, it said, will fall by an average of 76 percent for people who are currently insured and have incomes less than 250 percent of the poverty level (meaning less than $28,725 a year for an individual).
The report was prepared to help state officials evaluate proposals from insurers and develop marketing messages to reach consumers.
“There are 5.3 million Californians who will qualify to purchase insurance through the exchange,” said Peter V. Lee, the executive director of the California exchange. “Insights gained from this research confirm that most people will experience a positive impact.”
The California report follows a study by the Society of Actuaries, a professional organization, suggesting that the new law would contribute to higher insurance costs in the next three years.
Asked about such estimates, Kathleen Sebelius, the secretary of health and human services, acknowledged that costs could rise in the individual insurance market, particularly for men and for younger people. She noted that the law prohibits insurers from charging women more than men and limits their ability to charge higher premiums based on age. “Women are going to see some lower costs, some men are going to see some higher costs,” she said Tuesday at a White House briefing. “So it’s sort of a one-to-one shift.”
Republicans said the Society of Actuaries report validated their concerns. Senator Lamar Alexander, Republican of Tennessee, said, “This nonpartisan report offers more evidence that what I told the president in 2010 is true: individual insurance premiums will rise under his plan.”
Under the law, insurers cannot deny coverage or charge higher premiums to people because of pre-existing medical conditions.
As a result, Milliman said in the California study, “we expect the average currently insured to experience premium increases because they will be part of a new risk pool” including sicker people who have been excluded from the market in the past.
The White House says the fears of “rate shock” are overblown. Consumers can move from expensive health plans to more efficient, lower-cost plans, the administration says. Officials also predict that people gaining insurance will, on average, be younger and healthier than those who already have it.