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Actuary: PPACA fee could increase plan premiums 3.7%

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Republicans on the House Energy & Commerce health subcommittee today tried to move the focus of Patient Protection and Affordable Care Act (PPACA) discussions toward the nuts and bolts of implementation.

Wendell Potter, a former Cigna Corp. (NYSE:CI) executive who supports PPACA, talked at a subcommittee hearing on PPACA costs about how PPACA might have helped the family of Leslie Elder, a woman who faced bankruptcy and foreclosure because of a combination of Hodgkin’s lymphoma and an inability to qualify for health insurance.

The current efforts to change PPACA rules to “hold down costs” really exist to “help insurance companies meet profit goals,” Potter said.

Another witness, Christopher Carlson, an actuary at Oliver Wyman, suggested that the actual effects of PPACA might be different what supporters of the law expect.

Actuaries at Oliver Wyman — a consulting firm controlled by an insurance broker — are estimating, for example, that a new PPACA premium tax that will start in 2014 could increase health premium prices significantly all by itself, Carlson said.

PPACA drafters included the provision to raise money for PPACA programs, and to recoup a share of what drafters assumed would be a windfall health insurer profits as a result of new PPACA health insurance purchase subsidies.

The total tax revenue is supposed to start at $8 billion in 2014 and rise to about $14 billion in 2018.

“We estimate that the impact of these taxes will be to increase premium  rates by 1.9% to 2.3% in 2014, and by 2.8% and 3.7% in years 2018 and later,” Carlson said.

Because the tax is not deductible for federal taxes, the insurers will probably collect a total of $73 billion in extra premiums to cover the $60 billion cost of the payments to the government, Carlson said.

If PPACA works as drafters expect, new PPACA insurance rules meant to make coverage more accessible for older, sicker Americans will ban use of most personal health information in decisions on whether to sell an individual coverage. The law also will set new limits on use of health information other than age and location when carriers are pricing individual and small-group coverage.

Those rules may increase coverage prices for some young, healthy consumers with incomes high enough that they do not qualify for the new PPACA coverage subsidies, but most young adults will benefit from the changes, and new PPACA coverage standards will ensure that the coverage young people do have is solid coverage, Potter said.

Today, many young people with so-called affordable coverage have policies that will leave them with huge bills if they ever become seriously ill, Potter said. 

Today, in terms of fairness in access to health care services, “we rank below Bangladesh,” Potter said. 

“I think the current system is absolutely unsustainable,” Potter said at another point in the hearing.

Rep. Marsha Blackburn, R-Tenn., spent several minutes during the hearing describing employers in her state who have told her about recent increases in their health insurance rates and are struggling to continue to offer health benefits.

“What do you tell these employers who are trying to do the right thing?” Blackburn asked Potter.

Potter started to talk again about the example of the Elders — people who had been shut out of the commercial health insurance system.

Blackburn stopped Potter.

“You’ve sat there and told that story over and over,” Blackburn said. “What we have to do is look at what is happening to these insurance costs.”

Rep. Morgan Griffith, R-Va., mentioned the recent sudden U.S. Department of Health and Human Services (HHS) shutdown of the Pre-existing Condition Insurance Plan (PCIP) program as an example of a reason to have concerns about the fate of PPACA as a whole.

PCIP enrollment was much lower than expect, but claims costs were higher, and HHS recently announced that it was suspending enrollment of new applicants immediately, more than nine months earlier than expected.

“Are we making promises we can’t fulfill when we say we’re going to cover everybody?” Griffith asked. 

Douglas Holtz-Eakin, a former Congressional Budget Office (CBO) director, noted that PPACA defines “affordable” as a consumer spending less than 10 percent of income on health care, while the United States as a whole is spending close to 20 percent of national income on health care.

“By definition, not all of us can have affordable health care,” Holtz-Eakin predicted. “The law will never add up for everybody in the United States. It cannot.”

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