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AHIP: Many Factors - Not Just PPACA - Responsible for Soaring Health Costs

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WASHINGTON BUREAU – The Affordable Care Act is one – but just one – of the major contributors to recent increases in health costs, according to America’s Health Insurance Plans (AHIP).

Officials at AHIP, Washington, prepared an analysis of the factors responsible for the rising cost of health care in response to a group health cost hearing organized by the House Education and Workforce Committee’s health subcommittee.

Members of the committee and hearing witnesses talked mainly about the effects of Can of Wormsthe Affordable Care Act, the legislative package that includes the Patient Protection and Affordable Care Act (PPACA).

AHIP has been highly critical of some aspects of PPACA and PPACA implementation, but it says the causes of recent rate increases include many factors in addition to PPACA mandates, including the rising cost of medical services, the rising cost of prescription drugs, and a tendency for younger, healthier people to react to a weak economy by dropping coverage.

In Oregon, the prices of many medical services have increased at an average annual rate exceeding 10%, AHIP says.

In California, the group says, the price of a hospital stay increased by an average of more than 11% per year from 2000 to 2009.

“Trends likes these are being seen across the country,” AHIP says. “Focusing solely on premiums while failing to rein in underlying medical costs will not make health care coverage more affordable.”

At the hearing, the list of witnesses included Michael Brewer, president of the Lockton Benefit Group unit at Lockton Inc., Kansas City, Mo.

The cost of PPACA provisions could grow between now and 2014, when PPACA is set to create a system of insurance distribution exchanges and individual health products that will create a new, subsidized alternative to group health coverage, Brewer said.

The increased burden of group health insurance costs on an employer’s balance sheet

“will create tremendous tension within many clients between cost, profitability, and appropriate compensation and benefit structures,” Brewer said.

An actuarial analysis prepared by Lockton shows that the “play or pay” provision in PPACA – which will require employers to choose between offering group health coverage or paying a penalty – will give many Lockton clients in all industry segments an incentive to terminate group coverage once the subsidized exchange coverage is available, Brewer said.

The vast majority of “our clients currently spend far more on health insurance per employee than the nondeductible penalty under the play or pay mandate,” and the gap will be larger in 2014, Brewer said.

Lockton clients may be able cut their 2014 health benefits costs 44% by terminating group coverage that year, Brewer said.

Thomas Miller, a health policy researcher at the American Enterprise Institute, Washington, said concerns about “the unpredictability of what will be enforced and how it will be interpreted” leaves many employers “frozen in uncertainty in their health benefits planning, when not fearing the worst and finding their expectations met.”

More PPACA implementation coverage from National Underwriter Life & Health:


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