Some Nevadans May See Higher Premiums Under Obamacare

Editor’s note: This is one in an occasional series of stories on health care reform.

The Affordable Care Act may not be so affordable for some Nevadans.

The law, commonly called Obamacare, combines benefit mandates and subsidies designed to make health insurance less costly for millions of Americans who now lack coverage.

But observers ranging from state insurance officials to employee benefit consultants say some consumers could see premium increases big enough to price them out of insurance markets. If that happens, fewer people than expected could buy into the system, and that might mean the difference between Obamacare’s success or failure.

It’s not yet clear how dramatic Nevada’s premium increases might be. The state Division of Insurance has received no new product filings for the state’s public insurance exchange, Nevada Insurance Commissioner Scott Kipper said.

Kipper and other division officials declined to estimate what premiums might be, post-reform.

But they did say changes are coming, especially for consumers who buy plans on the individual market, rather than through their employers. Individual buyers make up 15.4 percent of the state’s fully insured market, excluding people who buy through self-insured businesses or government programs.

“They will see something that looks very different from what they have, and it may be priced very differently as a result,” said Glenn Shippey, an actuary in the life and health section of the Division of Insurance. “We’re not sure what that difference is going to be on an individual basis, but it’s important to understand there will be a lot of changes in existing policies.”

VANISHING INDIVIDUAL PLANS

Simply put, if you have an individual insurance plan, it will probably cease to exist. Its replacement will be a minimum benchmark — basic — plan with “essential health benefits” that all Nevada insurers must offer after January. Officials for the Division of Insurance and the Silver State Health Insurance Exchange recommended a benchmark plan similar to Health Plan of Nevada’s comprehensive yet flexible point-of-service plan, which is already the small-group market’s largest plan by enrollment.

The benchmark doesn’t mean every Nevadan must buy point-of-service coverage through Health Plan of Nevada, but it does mean every insurance carrier’s individual plan must meet those coverage levels.

So, whether they need it or not, Nevadans buying individual policies will be covered for maternity care, mental health services, infertility treatments, home health, bariatric surgery, chiropractic care and hearing aids.

Those benefits are common for comprehensive, large-group plans, but rare in individual coverage.

Obamacare also mandates that new plans pay for at least 60 percent of the cost of care they cover. Many individual policies pay just 40 percent of expenses.

The enhanced coverage could boost access to care for thousands of Nevadans, but there is a pricey flip side to those add-ons.

“There’s no way these plans can remain at the (premium) costs they were, because carriers have to provide more benefits in their plan structure,” said Todd Rich, chief deputy commissioner of the Division of Insurance. “They have to price the plans higher.”

Added Shippey: “Individuals in all states are going to see some significant increases, depending on what type of individual we’re talking about. The new laws and rules coming into effect could cause substantial premium increases for some individuals.”

But a richer benefits package isn’t the only factor set to drive up premiums.

New restrictions will limit the difference in premium costs between young, healthy people and older, sicker patients. Nevada law allows insurers to charge older, unhealthy people premiums as much as six times more than younger consumers pay. After January, that gap can only be three times more.

Also gone will be premium reductions for healthier groups. Today, insurers under­write businesses.

An athletic club staffed with healthy, young people gets a preferred rate, while a bar and grill where older employees live on fatty food gets a maximum rate, said Assurance Ltd. employee benefit consultant Frank Nolimal. He travels Southern Nevada giving businesses a presentation called, “The Good, the Bad and the Ugly of Health Care Reform and Beyond.”

Post-reform, insurers won’t be able to reward or penalize employee behavior. The community rating will be the same for all.

Those rating changes mean young, healthy people could see big increases in premium costs, while unhealthier populations could get a break.

“One side of the fence is subsidizing the other side to keep premiums level,” Nolimal said.

That could be a problem for individual buyers, because they lack tax benefits or employer assistance to pay for coverage, said Robert Zirkelbach, spokesman for the Washington-based trade group America’s Health Insurance Plans.

When someone must buy coverage on their own, they pay the full cost, and that makes them more price-sensitive, Zirkelbach said. That’s why many individuals trade comprehensive coverage for lower premiums.

LESS COVERAGE VS. LOWER PREMIUMS

Toying with that trade-off between less coverage and lower premiums could affect whether Obamacare works.

“The positive is that people are getting more benefits, and they’ll pay less out-of-pocket,” Zirkelbach said.

“But any time you add new benefits to a policy, you add to the cost of coverage. There’s a pretty broad agreement that, for these reforms to work, we need broad participation in the system, particularly among the younger and healthier, to offset the costs of those with high health-care needs. To the extent new mandates increase costs for younger people, they may price them out of the market altogether. That will drive up costs for everyone.”

Division of Insurance officials said it’s too early to tell how much premiums could change in January. And representatives of the state’s two biggest insurers, UnitedHealth Group and Anthem Blue Cross Blue Shield, either declined to comment or didn’t respond to a request for comment.

Advocacy groups and lawmakers have taken a stab at guesstimating, though. Their predictions vary wildly.

FEDERAL SUBSIDIES

As far back as 2009, Anthem officials crunched the numbers and said premiums for Nevada members with the company’s individual policies would rise 85 percent on average. For small businesses, the typical premium increases would be 70 percent.

Some groups would be hit harder than others: For a healthy, 25-year-old male, the monthly premium on an individual plan with a $2,500 deductible and comprehensive pharmaceutical coverage would jump 115 percent, from $119 to $257. A family of four in average health would pay 61 percent more, with premiums rising from $674 to $1,088.

But a 60-year-old couple in poor health would see an 11 percent decline, as monthly charges fell from $1,741 to $1,558.

In March 2012, a study prepared for the state by Massachusetts-based Gorman Actuarial found that individual-market premiums in Nevada could rise 11 percent to 30 percent on average, though federal subsidies could blunt that blow for lower-income consumers.

A January report in Contingencies, the American Academy of Actuaries’ publication, also predicted that people 21 to 29 will pay 42 percent higher premiums nationwide, while those 30 to 39 can expect to shell out 31 percent more. What’s more, adults 21 to 29 making $25,000 or more a year can expect to pay more.

An April study by consulting firm Milliman for America’s Health Insurance Plans found that a healthy 27-year-old U.S. male could see an average 149.8 percent annual premium jump, from $1,414 to $3,532.

Federal subsidies could change that calculation: A young man earning less than $25,000 or so a year would see premiums drop by 25 to 60 percent, thanks to tax breaks, while one who earns about $42,000 a year or more would see premiums spike 169 percent.

For an unhealthy, 57-year-old woman, yearly premiums could tick up 4.1 percent, from $7,892 to $8,214, though federal aid would bring down premiums 51 percent or more for women making less than roughly $42,000 a year.

‘GRUMBLINGS AND RUMORS’

Policymakers are now weighing in. U.S. Health and Human Services Secretary Kathleen Sebelius didn’t put numbers on it, but she told the Wall Street Journal in March that “there may be a higher cost associated with” moving individual buyers into a “fully insured product for the first time.”

Sebelius added that some men and younger customers could see rates rise, while women and older customers might enjoy rate drops.

Though the state Division of Insurance wouldn’t offer its own analysis, it is issuing caveats. Adam Plain, an insurance regulatory liaison with the agency, cautioned that premium studies use differing methods, and may rely on distinct regional demographic data that don’t apply in every market. Plus, assumptions used in studies may be outdated because new regulations are added daily to the books.

Employee benefits experts give mixed reviews to existing studies.

Nolimal said a 115 percent premium jump for younger, healthier consumers is “very close” to estimates he hears .

Quincy Branch, president and CEO of Branch Benefits Consultants in Las Vegas, said he hears “grumblings and rumors,” yet nothing concrete from carriers.

New premiums could become more concrete in coming weeks.

Insurers will begin filing plans with the Division of Insurance late this month and in early June. The division will make those plans available to the public shortly after they receive them, though Kipper said that won’t mean the agency has signed off on the premiums. He said the division would study rate requests to ensure they’re not excessive, inadequate or unfairly discriminatory. The approval process for each plan could take two to 10 weeks, depending on complexity. Plans would take effect Jan. 1.

Large-group markets for bigger employers will see fewer effects. Those plans typically offer the kind of comprehensive coverage just now coming to individual and small-group plans, and they’re spared community- and age-rating changes for two years, Nolimal said.

Self-insured companies, which pay health costs directly, are exempt from many mandates, though they often offer richer coverage than individual plans.

Still, Rich said the agency believes small and large groups will also feel the effects of new plan mandates, if not as much as individual buyers will.

Contact reporter Jennifer Robison at jrobison @reviewjournal.com or 702-380-4512. Follow @J_Robison1 on Twitter.

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Higher Health Insurance Premiums: The Obamacare Debate We Didn’t Have

Whitehouse.govLet’s talk about Obamacare and rate shock—and how we talked about the law’s effect on premiums when it was first being debated.  

The health law’s supporters are now admitting that premiums will go up for some young and health individuals buying health insurance through the exchange. But they say it’s not entirely fair to make a comparison between individual plans bought on an exchange and today’s plans, because exchange plans offer a far richer set of benefits. Nor should this really come as a shock to anyone, because this is what people were told to expect.

This is a point that The Washington Post’s Ezra Klein made on MSNBC last night in a discussion of Obamacare’s effect on premiums with The Manhattan Institute’s Avik Roy. Roy noted that, when compared with today’s rates, individual market premiums bought on an exchange would be dramatically higher for many younger, healthier people—with rates doubling in some cases versus the rates he found online.

Now it’s true that those online rates are teasers that don’t apply to everyone; 26 percent of the market will either pay more or not get coverage. But that still leaves roughly three quarters of the market who will see far higher rates. Maybe, Roy said last night, that’s just fine, because we believe that it’s “a good thing for people to pay double for their health insurance because we’re now protecting the sick. But that’s a debate we didn’t have really in 2009.” 

Except that according to Klein, it is a debate we had: “This is a debate we had,” he said. “This is what frustrates me here. I remember doing this debate over and over and over again. So Evan Bayh wrote the Congressional Budget Office—[Bayh] was a senator back then—he said: ‘What’s going to happen to average premiums?’ The CBO came back and said, ‘Well, average premiums are going to go up a bunch. And then people like me went in and looked at what they [the CBO] said, and they said, ‘Average premiums are going to go up but that’s because people are going to have to start buying better health care because they’re going to get subsidies, because we’re going to make them pay for better health care because now they can afford it.’”

Far higher rates for younger, healthier individuals were to be expected. “This was out there,” Klein finished. “And we talked about it a lot.”

I'm not so sure. Liberal wonks like Klein may have talked about it—we’ll get to that a little later. But the president and his administration did not talk about it much at all. Rather, the overarching message from the White House, and from the law’s supporters generally, was that Obamacare would cause health insurance premiums to drop. 

Let’s go back in time to when President Obama first began to make the case for his health care overhaul. Here’s how he touted his health plan in May 2007, early in his run for office. “If you already have health insurance, the only thing that will change for you under this plan is the amount of money you will spend on premiums. That will be less.” On the campaign trail in 2008, Obama continued to sell the law as a way to lower health premiums, promising at least 15 times to reduce health premiums for families by $2500 on average. And as Buzzfeed notes, Obama didn’t stop pointing to lower premiums when he made it into the White House in 2009. In May of that year, he told C-SPAN that if health industry groups commit to savings—“we end up saving $2 trillion…a lot of those savings can go back into the pockets of American consumers in the form of lower premiums. That’s what we are driving for.”

From the very beginning, in other words, Obama’s message was not that the law would result in higher premiums, but better coverage. It was that the law would lower premiums, end of story.

Now maybe you think that’s not fair. After all, these statements were made before the specifics of the law had been drafted, and before experts at the Congressional Budget Office and elsewhere would weigh in.

So let’s flash forward a few months, to the end of 2009, in the weeks leading up to the Senate’s vote to pass the health care law. What was the White House saying then?

A headline from the White House blog on November 4, 2009 makes it clear that the essential message about premiums hadn’t changed: “Word from the White House: Objective Analysis Shows Reform will Help Small Business, Lower Premiums for American Families.” [emphasis added] The “objective analysis” in question was a report from Jonathan Gruber, a health economist at the Massachusetts Institute of Technology, and a key architect of both Obamacare and the Massachusetts health care overhaul.

The White House blog post touted Gruber’s conclusion that the health care legislation would save individuals anywhere from $500 to $3000 a year, and families even more. And those savings, the post emphasized, would “come in addition to the more generous benefits consumers would receive by purchasing insurance through the newly  created exchange”—as well as “in addition to increased protections” for individuals with preexisting conditions. Gruber even claimed that the savings would come for those who did not qualify for subsidies. Low-income individuals eligible for assistance, he said, the savings would be much larger.

This is November of 2009, long after the bulk of the legislative work has been completed. And yet the White House and a prominent Obamacare adviser were still both claiming that premiums would go down, and that benefits would go up, for individual insurance purchased through an exchange. This was the message that the administration was selling. This was the debate they were having, from the time Obama started running for office until well into the first year of his presidency.  

Of course, we still haven’t talked about the Congressional Budget Office report that Klein mentioned—the one responding to Sen. Evan Bayh’s query about how the health law would affect insurance premiums. That came out shortly after Gruber’s report. The White House wrote up that report on its official blog too. And once again, the primary message is crystal clear. The headline to that post reads: “CBO Confirms Families Will Save Money Under Health Reform.” The second paragraph says that the health law “will mean lower premiums for American families.” And the very first bullet point in the list of highlights says that “Americans buying comparable health plans to what they have today in the individual market would see premiums fall by 14 to 20 percent.”

The only hint that higher premiums might be on the horizon if the health law passes comes a little later, when the post says that “where the CBO does see premiums rising, it's not because Americans are paying more for the same coverage – it's that they’re making a choice to purchase better plans that weren't previously available to them.” And it downplays this point by suggesting that the CBO may have understated the cost-savings the law will produce.

Yet even the admission that CBO does see some premiums rising turns out to have missed the mark. Part of the reason we’re now seeing some higher premiums in the exchanges is because of the coverage requirements exchange-based plans have to meet. It’s not that individuals are making their own choices to buy more expansive and thus more expensive coverage. It’s that insurers are being told by regulators that more expansive coverage is what they must sell.

Even by the time the CBO report arrives, there’s still no mistaking the message that the Obama White House was selling to anyone who would listen: that premiums would go down, that benefits would go up, and that if premiums did happen to go up, it would only be as a result of an individual choice to buy more robust coverage.

But what about the wonks, like Klein? What kind of conversation were they having at the end of 2009? If you take Klein as representative, you find that it was somewhat more nuanced than what was coming out of the White House, and that the higher cost of individual premiums was mentioned. But the emphasis was still on lower premiums, not on the tradeoffs made to get more robust coverage.

At the beginning of November 2009, for example, Klein quoted and linked to Gruber’s paper with no commentary, under the headline “Massachusetts provides evidence that health-care reform lowers insurance premiums.”

Later that month, Klein looked at the CBO analysis requested by Bayh. In the third paragraph, he notes that in the individual market, “average premiums are expected to rise by 10 to 12 percent.” His post goes on to explain that, according to the CBO, this is because the average insurance policy purchased through the exchange will cover a much larger share of an individual’s costs and a slightly wider range of benefits. In the end, what we’re looking at, he says, is “a 10 to 12 percent increase in premiums for insurance that's about 30 percent better than what people are getting now. It's a steal.”

So this is the discussion that Klein was having: Yes, average premiums increase somewhat, but benefits increase even more. But what about others? Not Paul Krugman; one of his posts referenced the CBO’s report and conclude that “premiums would stay about the same for people with group coverage, while falling significantly for most of those in the small-group or individual markets.”

Whether Klein’s discussion of individual market premium hikes in the exchanges would have led a typical reader to expect the kind of rate increases we’re seeing in California is another question. The percentage increases he wrote up were just 10 or 12 percent, not the 100 percent hikes Avik Roy has pointed out. On the other hand, Klein was talking about averages, and the biggest hikes are concentrated amongst the young and healthy demographic. It’s not possible say with certainty what most people would have taken away from his discussion of trade-offs.

But we do have some sense of what Klein wanted people to take away. First because in Klein’s initial write up of the CBO report, he goes on to emphasize that the individual market hikes occur before the application of subsidies, which he notes will be available to about 57 percent of the market. “So in the final analysis,” he wrotes, “the effect of reform on your typical individual market purchasers is to give them insurance that's about 30 percent better but only 10 to 12 percent more expensive, and then assure them subsidies that will lower their payments by more than 50 percent.” Yes, we’re still talking about averages. But it looks fairly plain that his message is first and foremost about lower premiums, not the tradeoff of better benefits for higher premiums.

Finally, we have an idea of what Klein wanted readers to take away from his analysis of the health law’s effect on premiums, because a few days later, he followed up with another post. The concluding paragraph of that post reiterates the key points from this original. “The individual market sees costs go up, as people can purchase better insurance at a lower cost,” he wrote. “And after subsidies, most people are paying less and getting more than they would absent reform.” Indeed, “most Americans will see their premiums go down even if you account for the better insurance plans they'll be purchasing.” The headline he wrote for his post emphasizes the main point: “To repeat, the CBO found that premiums go down under health care reform.”

This is the debate that even those relatively few Americans who follow wonky policy pundits were hearing—not one that emphasized tradeoffs, but one that repeatedly emphasized that Obamacare would have mostly positive impacts on premiums, and that any negative impacts would be modest. So it’s worth asking: Was this the sort of debate that effectively prepared people for the sort of rates we’re seeing in California, and that we’re likely to see in many other states as well? Or was it, as Roy said, a debate we didn’t really have in 2009? Decide for yourself. But when you do, know when it comes to the discussion of Obamacare and premiums that people were having in 2009, this is what was out there. And this is what the law’s administration backers and other supporters talked about a lot.

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Sebelius: Some Could See Insurance Premiums Rise

Associated PressHuman Services Secretary Kathleen Sebelius speaks about the federal health care overhaul during a news conference at City Hall, Wednesday, Feb. 20, 2013, in Philadelphia. (AP Photo/Matt Rourke)

Some people purchasing new insurance policies for themselves this fall could see premiums rise because of requirements in the health-care law, Health and Human Services Secretary Kathleen Sebelius told reporters Tuesday.

Ms. Sebelius’s remarks come weeks before insurers are expected to begin releasing rates for plans that start on Jan. 1, 2014, when key provisions of the health law kick in. Premiums have been a sensitive subject for the Obama administration, which is counting on elements in the health law designed to increase competition among insurers to keep rates in check. The administration has pointed to subsidies that will be available for many lower-income Americans to help them with the cost of coverage.

The secretary’s remarks are among the first direct statements from federal officials that people who have skimpy health plans right now could face higher premiums for plans that are more generous. She noted that the law requires plans to provide better benefits and treat all customers equally regardless of their medical claims.

“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. “But we feel pretty strongly that with subsidies available to a lot of that population that they are really going to see much better benefit for the money that they’re spending.”

Ms. Sebelius added that those customers currently pay more for their health care if their plans have high out-of-pocket costs, high deductibles or exclude particular types of coverage, such as mental health treatment. She also said that some men and younger customers could see their rates increase while women and older customers could see their rates drop because the law restricts insurers’ ability to set rates based on age and gender.

Most people who buy their own insurance policies will begin doing so this fall through new online marketplaces, which federal officials believe will force insurers to keep their prices down.

“As a former insurance commissioner I have watched what transparency does to a market,” Ms. Sebelius said. “This is the first time ever in the history of the United States that insurance companies have to file their rates, it has to be very transparent, they have to offer the same kind of coverage without 5,000 tiny little lines and internal caps, and they have to compete for customers. And I am a believer in the market strategies that in and of itself will minimize the rate impact.”

As The Wall Street Journal reported last week, some insurers have already begun signaling they could dramatically increase prices for people buying policies in the individual market to compensate for restrictions on how they treat consumers, as well as new fees and requirements that they provide bigger benefits packages.

The Society of Actuaries, a nonpartisan professional association, has issued a new report warning that the cost of medical claims in the new individual-insurance market could rise by an average of 32% per person over the first few years the law is in place, as more people with higher medical needs get coverage, and that the impact will be very different depending on the state. Medical bills are another key factor in determining premiums.

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Study: Premiums Could Rise Average Of 40 Percent Under ObamaCare

Health insurance premiums could rise by as much as 40 percent as a result of President Obama's healthcare law, according to a new study.

The survey of premiums in six states found that premiums could increase most significantly for young, healthy men. 

Premiums will rise for people who currently purchase bare-bones plans with high deductibles and meager coverage. They'll be forced to upgrade to policies that must offer at least a certain level of coverage.

Democrats say many of the meager policies on the market today give people a false sense of security — they think they have health insurance, but their policies don't actually cover the services they're most likely to need, even in an emergency.

Republicans argue that forcing consumers to purchase different plans violates President Obama's pledge that people who like their healthcare coverage can keep it. The changes impose higher costs on those who can least afford it, critics say.

Most people who see their premiums rise will get help from the federal government to help cover the additional costs, according to Thursday's survey, which was conducted by the Milliman consulting firm on behalf of Center Forward.

The healthcare law establishes new insurance exchanges in each state. The exchanges are primarily for people who buy coverage on their own, rather than purchasing insurance through an employer. 

People in the individual market currently tend to choose policies that don't offer much coverage and carry high out-of-pocket costs for the services they do cover, according to Milliman's research. 

The firm analyzed the individual markets in six states with varying degrees of regulation already in place. In New Jersey, where insurance is already highly regulated, the healthcare law won't lead to much of a premium hike at all — in fact, consumers could see their costs fall by as much as 25 percent.

But in states that don't already restrict meager insurance policies, the healthcare law could have a bigger impact. In Florida and Ohio, premiums for one of the cheapest individual policies allowed under ObamaCare could cost upwards of 50 percent more than the more bare-bones plans available now.

Across the six states studied, 40 to 60 percent of people on the individual market will be eligible for subsidies to help offset the cost of insurance, Milliman found.

The law provides subsidies, based on income, to help cover premiums, as well as separate subsidies to defray out-of-pocket costs. Even if underlying premiums rise, many people will see their own costs fall because of the help they'll get from subsidies, Milliman said.

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Rate Shock: In California, Obamacare to Increase Individual Health Insurance Premiums by 64-146%

Angela Braly, then-CEO of WellPoint, testified before Congress about allegations that its California unit, Anthem Blue Cross, was raising premiums on some customers by more than 30 percent. Last week, California announced that the Affordable Care Act would increase non-group insurance premiums by as much as 146 percent. (Image courtesy U.S. House of Representatives)

One of the most serious flaws with Obamacare is that its blizzard of regulations and mandates drives up the cost of insurance for people who buy it on their own. This problem will be especially acute when the law’s main provisions kick in on January 1, 2014, leading many to worry about health insurance “rate shock.”

Last week, the state of California claimed that its version of Obamacare’s health insurance exchange would actually reduce premiums. “These rates are way below the worst-case gloom-and-doom scenarios we have heard,” boasted Peter Lee, executive director of the California exchange.

But the data that Lee released tells a different story: Obamacare, in fact, will increase individual-market premiums in California by as much as 146 percent.

Lee’s claims that there won’t be rate shock in California were repeated uncritically in some quarters. “Despite the political naysayers,” writes my Forbes colleague Rick Ungar, “the healthcare exchange concept appears to be working very well indeed in states like California.” A bit more analysis would have prevented Rick from falling for California’s sleight-of-hand.

Here’s what happened. Last week, Covered California—the name for the state’s Obamacare-compatible insurance exchange—released the rates that Californians will have to pay to enroll in the exchange. “The rates submitted to Covered California for the 2014 individual market,” the state said in a press release, “ranged from two percent above to 29 percent below the 2013 average premium for small employer plans in California’s most populous regions.”

That’s the sentence that led to all of the triumphant commentary from the left. “This is a home run for consumers in every region of California,” exulted Peter Lee.

Except that Lee was making a misleading comparison. He was comparing apples—the plans that Californians buy today for themselves in a robust individual market—and oranges—the highly regulated plans that small employers purchase for their workers as a group. The difference is critical.

Obamacare to double individual-market premiums

If you’re a 25 year old male non-smoker, buying insurance for yourself, the cheapest plan on Obamacare’s exchanges is the catastrophic plan, which costs an average of $184 a month. (That’s the median monthly premium across California’s 19 insurance rating regions.)

The next cheapest plan, the “bronze” comprehensive plan, costs $205 a month. But in 2013, on eHealthInsurance.com (NASDAQ:EHTH), the average cost of the five cheapest plans was only $92. In other words, for the average 25-year-old male non-smoking Californian, Obamacare will drive premiums up by between 100 and 123 percent.

Under Obamacare, only people under the age of 30 can participate in the slightly cheaper catastrophic plan. So if you’re 40, your cheapest option is the bronze plan. In California, the median price of a bronze plan for a 40-year-old male non-smoker will be $261. But on eHealthInsurance, the average cost of the five cheapest plans was $121. That is, Obamacare will increase individual-market premiums by an average of 116 percent.

For both 25-year-olds and 40-year-olds, then, Californians under Obamacare who buy insurance for themselves will see their insurance premiums double.

Impact highest in Bay Area, Orange County, and San Diego

In the map below, I illustrate the regional variations in Obamacare’s rate hikes. For each of the state’s 19 insurance regions, I compared the median price of the bronze plans offered on the exchange to the median price of the five cheapest plans on eHealthInsurance.com for the most populous zip code in that region. (eHealth offers more than 50 plans in the typical California zip code; focusing on the five cheapest is the fairest comparator to the exchanges, which typically offered three to six plans in each insurance rating region.)

As you can see, Obamacare’s impact on 40-year-olds is steepest in the San Francisco Bay area, especially in the counties north of San Francisco, like Marin, Napa, and Sonoma. Also hard-hit are Orange and San Diego counties.

According to Covered California, 13 carriers are participating in the state’s exchange, including Anthem Blue Cross (NYSE:WLP), Health Net (NYSE:HNT), Molina (NYSE:MOH), and Kaiser Permanente. So far, UnitedHealthCare (NYSE:UNH) and Aetna (NYSE:AET) have stayed out.

Spinning a public-relations disaster

It’s great that Covered California released this early the rates that insurers plan to charge on the exchange, as it gives us an early window into how the exchanges will work in a state that has an unusually competitive and inexpensive individual market for health insurance. But that’s the irony. The full rate report is subtitled “Making the Individual Market in California Affordable.” But Obamacare has actually doubled individual-market premiums in the Golden State.

How did Lee and his colleagues explain the sleight-of-hand they used to make it seem like they were bringing prices down, instead of up? “It is difficult to make a direct comparison of these rates to existing premiums in the commercial individual market,” Covered California explained in last week’s press release, “because in 2014, there will be new standard benefit designs under the Affordable Care Act.” That’s a polite way of saying that Obamacare’s mandates and regulations will drive up the cost of premiums in the individual market for health insurance.

But rather than acknowledge that truth, the agency decided to ignore it completely, instead comparing Obamacare-based insurance to a completely different type of insurance product, that bears no relevance to the actual costs that actual Californians face when they shop for coverage today. Peter Lee calls it a “home run.” It’s more like hitting into a triple play.

Obama attacked insurers in 2010 for much smaller increases

That Obamacare more than doubles insurance premiums for many Californians is especially ironic, given the political posturing of the President and his administration in 2010. In February of that year, Anthem Blue Cross announced that some groups (but not the majority) would face premium increases of as much as 39 percent. The White House and its allies in the blogosphere, cynically, claimed that these increases were due to greedy profiteering by the insurers, instead of changes in the underlying costs of the insured population.

“These extraordinary increases are up to 15 times faster than inflation and threaten to make health care unaffordable for hundreds of thousands of Californians, many of whom are already struggling to make ends meet in a difficult economy,” said Health and Human Services Secretary Kathleen Sebelius. “[Anthem’s] strong financial position makes these rate increases even more difficult to understand.” The then-Democratic Congress called hearings. Even California Insurance Commissioner Steve Poizner, a Republican running for governor, decided to launch an investigation.

Soon after, WellPoint announced that, in fact, because of lower revenues and higher spending on patient care, the company earned 11 percent less in 2010 than it did in 2009. So much for greedy profiteering.

So, to summarize: Supporters of Obamacare justified passage of the law because one insurer in California raised rates on some people by as much as 39 percent. But Obamacare itself more than doubles the cost of insurance on the individual market. I can understand why Democrats in California would want to mislead the public on this point. But journalists have a professional responsibility to check out the facts for themselves.

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UPDATE 1: On Twitter, Jonathan Cohn of The New Republic argues that I’m being unkind to California (1) by not describing the mandates that Obamacare imposes on insurers in the individual market, and (2) not explaining that low-income people will be eligible for subsidies that protect them from much of the rate shock.

For an extensive discussion of Obamacare’s costly insurance mandates, such as its requirement that plans cover you whether you’re healthy or sick, read this post. For a discussion of how Obamacare’s insurance mandates dramatically increase the cost of insurance for younger workers, go here.

Jon is right that low-income individuals will be protected from these rate increases because of Obamacare’s subsidies, but if you’re not low-income, you face a double-whammy: higher taxes to pay for those subsidies, and higher indvidual-market insurance costs for yourself. A better approach would be to offer everyone access to low-cost consumer-driven health coverage.

UPDATE 2: A number of writers did call out California for the apples-to-oranges comparison last week, including David Freddoso, Philip Klein, and Lanhee Chen.

Lanhee, writing in Bloomberg View, does the useful exercise of showing that even for plans with the same generous benefit package that Obamacare requires, eHealthInsurance is significantly cheaper:

To put it simply: Covered California is trying to make consumers think they’re getting more for less when, in fact, they’re just getting the same while paying more.

Yet there are many plans on the individual market in California today that offer a structure and benefits that are almost identical to those that will be available on the state’s health insurance exchange next year. So, let’s make an actual apples-to-apples comparison for the hypothetical 25-year-old male living in San Francisco and making more than $46,000 a year. Today, he can buy a PPO plan from a major insurer with a $5,000 deductible, 30 percent coinsurance, a $10 co-pay for generic prescription drugs, and a $7,000 out-of-pocket maximum for $177 a month.

According to Covered California, a “Bronze” plan from the exchange with nearly the same benefits, including a slightly lower out-of-pocket maximum of $6,350, will cost him between $245 and $270 a month. That’s anywhere from 38 percent to 53 percent more than he’ll have to pay this year for comparable coverage! Sounds a lot different than the possible 29 percent “decrease” touted by Covered California in their faulty comparison.

While Covered California acknowledges that it’s tough to compare premiums pre- and post-Obamacare, at the very least, it could have made a legitimate comparison so consumers could fairly evaluate the impacts of Obamacare.

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Some Nevadans May See Higher Premiums Under Obamacare

Editor’s note: This is one in an occasional series of stories on health care reform.

The Affordable Care Act may not be so affordable for some Nevadans.

The law, commonly called Obamacare, combines benefit mandates and subsidies designed to make health insurance less costly for millions of Americans who now lack coverage.

But observers ranging from state insurance officials to employee benefit consultants say some consumers could see premium increases big enough to price them out of insurance markets. If that happens, fewer people than expected could buy into the system, and that might mean the difference between Obamacare’s success or failure.

It’s not yet clear how dramatic Nevada’s premium increases might be. The state Division of Insurance has received no new product filings for the state’s public insurance exchange, Nevada Insurance Commissioner Scott Kipper said.

Kipper and other division officials declined to estimate what premiums might be, post-reform.

But they did say changes are coming, especially for consumers who buy plans on the individual market, rather than through their employers. Individual buyers make up 15.4 percent of the state’s fully insured market, excluding people who buy through self-insured businesses or government programs.

“They will see something that looks very different from what they have, and it may be priced very differently as a result,” said Glenn Shippey, an actuary in the life and health section of the Division of Insurance. “We’re not sure what that difference is going to be on an individual basis, but it’s important to understand there will be a lot of changes in existing policies.”

VANISHING INDIVIDUAL PLANS

Simply put, if you have an individual insurance plan, it will probably cease to exist. Its replacement will be a minimum benchmark — basic — plan with “essential health benefits” that all Nevada insurers must offer after January. Officials for the Division of Insurance and the Silver State Health Insurance Exchange recommended a benchmark plan similar to Health Plan of Nevada’s comprehensive yet flexible point-of-service plan, which is already the small-group market’s largest plan by enrollment.

The benchmark doesn’t mean every Nevadan must buy point-of-service coverage through Health Plan of Nevada, but it does mean every insurance carrier’s individual plan must meet those coverage levels.

So, whether they need it or not, Nevadans buying individual policies will be covered for maternity care, mental health services, infertility treatments, home health, bariatric surgery, chiropractic care and hearing aids.

Those benefits are common for comprehensive, large-group plans, but rare in individual coverage.

Obamacare also mandates that new plans pay for at least 60 percent of the cost of care they cover. Many individual policies pay just 40 percent of expenses.

The enhanced coverage could boost access to care for thousands of Nevadans, but there is a pricey flip side to those add-ons.

“There’s no way these plans can remain at the (premium) costs they were, because carriers have to provide more benefits in their plan structure,” said Todd Rich, chief deputy commissioner of the Division of Insurance. “They have to price the plans higher.”

Added Shippey: “Individuals in all states are going to see some significant increases, depending on what type of individual we’re talking about. The new laws and rules coming into effect could cause substantial premium increases for some individuals.”

But a richer benefits package isn’t the only factor set to drive up premiums.

New restrictions will limit the difference in premium costs between young, healthy people and older, sicker patients. Nevada law allows insurers to charge older, unhealthy people premiums as much as six times more than younger consumers pay. After January, that gap can only be three times more.

Also gone will be premium reductions for healthier groups. Today, insurers under­write businesses.

An athletic club staffed with healthy, young people gets a preferred rate, while a bar and grill where older employees live on fatty food gets a maximum rate, said Assurance Ltd. employee benefit consultant Frank Nolimal. He travels Southern Nevada giving businesses a presentation called, “The Good, the Bad and the Ugly of Health Care Reform and Beyond.”

Post-reform, insurers won’t be able to reward or penalize employee behavior. The community rating will be the same for all.

Those rating changes mean young, healthy people could see big increases in premium costs, while unhealthier populations could get a break.

“One side of the fence is subsidizing the other side to keep premiums level,” Nolimal said.

That could be a problem for individual buyers, because they lack tax benefits or employer assistance to pay for coverage, said Robert Zirkelbach, spokesman for the Washington-based trade group America’s Health Insurance Plans.

When someone must buy coverage on their own, they pay the full cost, and that makes them more price-sensitive, Zirkelbach said. That’s why many individuals trade comprehensive coverage for lower premiums.

LESS COVERAGE VS. LOWER PREMIUMS

Toying with that trade-off between less coverage and lower premiums could affect whether Obamacare works.

“The positive is that people are getting more benefits, and they’ll pay less out-of-pocket,” Zirkelbach said.

“But any time you add new benefits to a policy, you add to the cost of coverage. There’s a pretty broad agreement that, for these reforms to work, we need broad participation in the system, particularly among the younger and healthier, to offset the costs of those with high health-care needs. To the extent new mandates increase costs for younger people, they may price them out of the market altogether. That will drive up costs for everyone.”

Division of Insurance officials said it’s too early to tell how much premiums could change in January. And representatives of the state’s two biggest insurers, UnitedHealth Group and Anthem Blue Cross Blue Shield, either declined to comment or didn’t respond to a request for comment.

Advocacy groups and lawmakers have taken a stab at guesstimating, though. Their predictions vary wildly.

FEDERAL SUBSIDIES

As far back as 2009, Anthem officials crunched the numbers and said premiums for Nevada members with the company’s individual policies would rise 85 percent on average. For small businesses, the typical premium increases would be 70 percent.

Some groups would be hit harder than others: For a healthy, 25-year-old male, the monthly premium on an individual plan with a $2,500 deductible and comprehensive pharmaceutical coverage would jump 115 percent, from $119 to $257. A family of four in average health would pay 61 percent more, with premiums rising from $674 to $1,088.

But a 60-year-old couple in poor health would see an 11 percent decline, as monthly charges fell from $1,741 to $1,558.

In March 2012, a study prepared for the state by Massachusetts-based Gorman Actuarial found that individual-market premiums in Nevada could rise 11 percent to 30 percent on average, though federal subsidies could blunt that blow for lower-income consumers.

A January report in Contingencies, the American Academy of Actuaries’ publication, also predicted that people 21 to 29 will pay 42 percent higher premiums nationwide, while those 30 to 39 can expect to shell out 31 percent more. What’s more, adults 21 to 29 making $25,000 or more a year can expect to pay more.

An April study by consulting firm Milliman for America’s Health Insurance Plans found that a healthy 27-year-old U.S. male could see an average 149.8 percent annual premium jump, from $1,414 to $3,532.

Federal subsidies could change that calculation: A young man earning less than $25,000 or so a year would see premiums drop by 25 to 60 percent, thanks to tax breaks, while one who earns about $42,000 a year or more would see premiums spike 169 percent.

For an unhealthy, 57-year-old woman, yearly premiums could tick up 4.1 percent, from $7,892 to $8,214, though federal aid would bring down premiums 51 percent or more for women making less than roughly $42,000 a year.

‘GRUMBLINGS AND RUMORS’

Policymakers are now weighing in. U.S. Health and Human Services Secretary Kathleen Sebelius didn’t put numbers on it, but she told the Wall Street Journal in March that “there may be a higher cost associated with” moving individual buyers into a “fully insured product for the first time.”

Sebelius added that some men and younger customers could see rates rise, while women and older customers might enjoy rate drops.

Though the state Division of Insurance wouldn’t offer its own analysis, it is issuing caveats. Adam Plain, an insurance regulatory liaison with the agency, cautioned that premium studies use differing methods, and may rely on distinct regional demographic data that don’t apply in every market. Plus, assumptions used in studies may be outdated because new regulations are added daily to the books.

Employee benefits experts give mixed reviews to existing studies.

Nolimal said a 115 percent premium jump for younger, healthier consumers is “very close” to estimates he hears .

Quincy Branch, president and CEO of Branch Benefits Consultants in Las Vegas, said he hears “grumblings and rumors,” yet nothing concrete from carriers.

New premiums could become more concrete in coming weeks.

Insurers will begin filing plans with the Division of Insurance late this month and in early June. The division will make those plans available to the public shortly after they receive them, though Kipper said that won’t mean the agency has signed off on the premiums. He said the division would study rate requests to ensure they’re not excessive, inadequate or unfairly discriminatory. The approval process for each plan could take two to 10 weeks, depending on complexity. Plans would take effect Jan. 1.

Large-group markets for bigger employers will see fewer effects. Those plans typically offer the kind of comprehensive coverage just now coming to individual and small-group plans, and they’re spared community- and age-rating changes for two years, Nolimal said.

Self-insured companies, which pay health costs directly, are exempt from many mandates, though they often offer richer coverage than individual plans.

Still, Rich said the agency believes small and large groups will also feel the effects of new plan mandates, if not as much as individual buyers will.

Contact reporter Jennifer Robison at jrobison @reviewjournal.com or 702-380-4512. Follow @J_Robison1 on Twitter.

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Individual and Small Group Insurance Premiums and the Affordable Care Act: Analytic Results

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Is ObamaCare Causing Health Insurance Premiums to Rise?

The full title of the legislation commonly known as ObamaCare is the Patient Protection and Affordable Care Act. It's often described using just the last three words — the Affordable Care Act — and “affordability” was at the heart of the White House’s argument for the law. But so far, there are few signs that health care will become more affordable as a result of the law. Indeed, it increasingly looks as if the opposite could be true — that ObamaCare may be causing higher premiums rather than preventing them. 

Over the weekend, The New York Times published a report noting that health insurers across the nation are both “seeking and winning double-digit increases in premiums” — this despite the fact that “one of the biggest objectives of the Obama administration’s health care law was to stem the rapid rise in insurance costs for consumers.”

The Times reports that health insurers have successfully raised rates by at least 20 percent in Ohio and Florida, increases that it says add several hundred dollars to the monthly cost of insurance. And in California, three insurers have requested increases of more than 20 percent for individuals who do not receive employer-sponsored insurance and small businesses. The story describes those two groups as “particularly vulnerable” to high rate increases.

The Times isn’t the first to report big health insurance increases coming down the pipeline. Aetna’s CEO warned last month that small and individual group markets were likely to increase by an average of 25 to 50 percent, and suggested that some policyholders might see their rates double.

What’s going on? Why are these rates going up?

A big chunk of the Times article focuses on the law’s insurance rate review provision, which gives the federal government the power to review but not reject health insurance rate increases.

Some state insurance regulators already have the power to reject rates, however, and the Times suggests that the double-digit rate increases  “[demonstrate] the striking difference between places like New York, one of the 37 states where legislatures have given regulators some authority to deny or roll back rates deemed excessive, and California, which is among the states that do not have that ability.”

So is the problem that ObamaCare did not grant new powers to reject rate increases? California health insurance commissioner Dave Jones offers an explicit endorsement of this theory, saying that the lack of new authority to reject health insurance rate increases is a “huge loophole in the Affordable Care Act.”

Jones might have rejected higher rates in California if given the chance, and it's true that some states, Massachusetts in particular, have used their rate authority aggressively. But the power to reject rates has not always stopped double digit increases in other states. In fact, according to a 2011 Congressional Research Service report on health insurance rate review policies in the states, both Ohio and Florida have “prior approval” requirements in place in their individual, small, and large group markets. In contrast to California’s “file and use” rules, which allow regulators limited power to disapprove a filing if an insurer is found to not be in compliance with some other regulation, prior approval rules mean that “insurance companies must file proposed rate changes and the state has the authority to approve, disapprove or modify the request.” And yet according to the Times, both states have seen premium increases in excess of 20 percent.

Perhaps there's another explanation? For example: Might ObamaCare’s new rules and regulations being playing some role in the increases? There’s good reason to think the law itself is at least partially responsible.

It's seems likely, for example, that ObamaCare’s new coverage mandates have contributed to some of the increase in the individual market: Consulting firm Aon Hewitt estimates that those premiums have gone up about 5 percent as a result of the law.

That explains some of the increase. But not all of it. Which is why those looking for another culprit should consider the possibility that a provision intended to help consumers get better value for their money is actually costing them higher premiums.

That provision, often referred to as the 80/20 rule, sets mandatory medical loss ratios (MLRs) for health insurers. The MLR is an accounting requirement which says that insurers have to spend at least 80 percent of their total premium revenue on medical expenses, leaving just 20 percent for administrative costs, marketing, and other non-medical expenditures. Any insurer that fails to meet this target must issue rebates to customers. This year, insurers rebated about $1 billion.

The MLR provision creates two incentives for insurers to jack up health insurance premiums. One is the plain fact that with profit and administrative costs capped as a percentage of premium revenue, the easiest way to generate larger profits is to charge higher premiums.

The other is that the rebate requirement means insurers may need to charge higher up-front premiums in order to protect themselves from the risk of a bad year. As Scott Harrington, a professor in the University of Pennsylvania's Department of Health Management, explained in a November 2012 paper, that’s because health insurance claims — and thus MLRs — fluctuate significantly between years. Harrington's paper, which got funding from a health insurance trade group, argues that the annual variation, and the resulting uncertainty, creates a problem for insurers: If claims are low in a given year, they end up rebating the difference to the customer because of the MLR rule. If claims are unexpectedly high, however, they end up eating the difference. Insurers thus have a incentive to protect themselves by charging high premiums at the outset, and then paying those premiums back in rebates should claims come in at low or expected levels.

Is the MLR rule causing the higher premium requests? It's hard to say with certainty, but it fits the bill in many ways: Harrington's analysis suggests that the high up front premiums should be concentrated in the small-group and individual markets, which is exactly what the Times reports. No matter what, it's clear that ObamaCare isn't resulting in lower premiums. And for many people, in the years after the law, premiums aren't just going to up up a little. They're going to rise a lot. 

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Higher Health Care Premiums Could Cause ObamaCare To Death Spiral

Doctor Using Stethoscope to Examine Toddler

This weekend, the New York Times reported on a development that’s completely unsurprising to critics of President Obama’s national health care law: “Health insurance companies across the country are seeking and winning double-digit increases in premiums for some customers, even though one of the biggest objectives of the Obama administration’s health care law was to stem the rapid rise in insurance costs for consumers.” The Times story heavily suggests that the problem is that Obamacare didn’t give federal regulators enough power to outright reject rate increases deemed too high. But Reason‘s Peter Suderman makes that case that the real culprit could be Obamacare itself — particularly its requirement that all insurance policies pay out at least 80 percent of what it collects in premiums on medical expenses. Known as the “medical loss ratio” (MLR) rule, this requirement creates an incentive for insurers to hike premiums by reducing their profit margins on any given policy.

Whatever the cause of the higher premiums, however, this trend presents a key structural challenge to Obamacare. The health care law aims to prevent insurers from discriminating against those with pre-existing conditions, to make sure that policies cover a specified package of benefits, and to limit how much extra money insurers can charge older and sicker patients. All of these provisions increase costs and decrease insurance industry profits. But through the mandate forcing individuals to purchase insurance, the law hopes to push enough younger and healthier Americans into the insurance pool to offset theses cost increases. This is where the problem with rising premiums comes in.

The Times story notes that, “Particularly vulnerable to the high rates are small businesses and people who do not have employer-provided insurance and must buy it on their own.” This is precisely the population that the federal government hopes to induce to purchase insurance through the mandate. But as the Obama administration argued before the Supreme Court, those who choose not to purchase insurance would still be in compliance with the law so long as they paid the tax penalty for not purchasing insurance. Should premiums continue to rise, more and more uninsured Americans are going to choose to pay the penalty rather than purchase expensive insurance. And those who go without insurance are more likely to be the ones who can afford to do so — young and healthy Americans with limited medical expenses. Should this occur, insurers would have to raise premiums even more to subsidize the expenses of the sicker beneficiaries they must cover under the law. This, in turn, would cause additional people to forgo insurance and pay the fine. And so on. This is known in the health care policy community as the “death spiral” and it’s one of the biggest threats to the structure of Obamacare.

With most of the major provisions of the health care law going into effect in 2014, this will be an important trend to keep an eye on.

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Study Predicts Health Law Will Raise Premiums On Young Adults

The study says a provision linking prices for older and younger patients could raise costs on the young.

Young adults will see higher health insurance premiums under the Affordable Care Act (ACA) because of a provision that links prices for older and younger patients, according to a new study.

Actuaries at management consulting firm Oliver Wyman predicted the law's age rating restrictions could mean a 42 percent hike in premium costs for people aged 21 to 29 when they buy individual coverage.

"This means that close to 4 million uninsured individuals … can expect to pay more out of pocket for single coverage than they otherwise would, even given the availability of premium assistance," study authors wrote.

President Obama's signature healthcare law limited the amount insurers can charge older people for their health insurance to a maximum of three times the amount younger people pay.

Supporters say age rating restrictions are necessary to ensure seniors are charged fairly for health insurance.

Critics of the law argue the requirement will raise costs for young adults and lead them to forgo health insurance, destabilizing the individual market for coverage.

The lead advocacy group for U.S. health plans recently petitioned the Health and Human Services (HHS) Department to delay its implementation of the 3:1 rule.

"Higher rates for the younger population combined with low mandate penalties during the first years of the ACA implementation will result in adverse selection because younger individuals are likely to choose not to purchase coverage," America's Health Insurance Plans (AHIP) wrote in comments to HHS.

"When these younger individuals do not enroll, destabilization of the individual market will occur, premiums will increase in the individual market for enrollees of all ages, and enrollment will decline."

Oliver Wyman's study predicted that people in their 30s purchasing single coverage will also see an increase in premium costs totaling 31 percent, while people aged 60 to 64 would see premiums increase by about 1 percent.

The study was published in the January/February 2013 issue of Contingencies, an actuarial publication, and distributed by AHIP.

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Obamacare Could Double Health Care Premiums: Aetna CEO

Bertolini said that insurance premiums could double in some places just on the basis of what types of policies people buy today.

He also said that when Obamacare is fully implemented, it won't start the way people had hoped and it won't be cheaper.

Over the longer run, the key to bringing down premiums will be controlling health care costs, he added. "It'll be fits and starts, but we'll get there," Bertolini said.

Higher premiums also will not necessarily mean higher margins for Aetna. "The people coming into the system will be sicker because they have not used services," Bertolini said. "So in the initial part of this program it will cost more to take care of people because they have been going without health care for so long."

The Aetna executive also weighed in on the debate over the country's fiscal situation.

(Read More: Forget the 'Fiscal Cliff,' Look at These Cliffs)

Bertolini said a big deal would be the best deal for the country, but that it's looking increasingly unlikely that politicians do anything more than a short-term fix which won't be enough to restore confidence.

And confidence is key to increasing business investment and spurring economic growth. "A grand bargain won't create a slow economy," Bertolini said. "It will restore confidence and we'll all invest."

He added, "Americans don't want Plan B, they don't want a short term fix. They want the very best we can come up with. They want Plan A."

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