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What will PPACA really do to coverage prices?

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A drafter of the Patient Protection and Affordable Care Act (PPACA) says health insurance industry actuaries are painting a misleading picture of how PPACA will affect the cost of coverage.

Christopher Spiro, a health policy specialist at the Center for American Progress, talked about PPACA rate shock predictions Monday at a PPACA health insurance rate hearing organized by the House Energy & Commerce oversight subcommittee.

The list of witness also included Cori Uccello of the American Academy of Actuaries (AAA); Chris Carlson of the Oliver Wyman Group; and Daniel Durham of America’s Health Insurance Plans (AHIP).

Rep. Tim Murphy, R-Pa., the subcommittee chairman, said he convened the hearing because he and many other Americans are wondering, “Will Obamacare increase the cost of my health insurance?”

Uccello talked about the AAA’s consensus view that predicting just how the PPACA health insurance exchange program and PPACA health insurance product requirements could affect coverage prices after Jan. 1, 2014, is complicated.

“How premiums will change depends on many factors, including the effectiveness of the individual mandate and premium subsidies at attracting low-cost enrollees into the insurance market,” Uccello said, according to a written version of her testimony posted on the committee’s website.

Changes in premiums will also depend on “the new benefit requirements that may lead to higher premiums but lower out-of-pocket costs, employer decisions regarding whether to continue offering insurance and the health status of those whose coverage is dropped, how each state’s current issue and rating rules compare to those beginning in 2014, and each individual’s demographic characteristics and health status (and income when determining premiums net of subsidies),” Uccello said.

Carlson, an actuary at Oliver Wyman, talked about reviews of 2014 rate filings for the top three health insurers in Oregon, Maryland and Vermont.

In Oregon, for example, the average premium rates the top insurers have filed reflect an increase of 36 percent to 53 percent over current premium rates, Carlson said.

Carlson also defended the actuaries making the rate increase forecasts against allegations of bias.

“The actuarial profession has a strong reputation of professionalism and independence,” Carlson said. “While many actuaries work and consult with health insurance companies, we also work with regulators and consumer advocacy groups, and our professions high standards of professionalism always come first. This is illustrated in our code of professional conduct which, among other things, requires actuaries to act honestly, with integrity and competence, not be influenced by conflicts of interest, and only perform work where we are properly qualified.”

The rates actuaries are proposing require certification, and the proposals are being prepared with the utmost care, Carlson said.

“As actuaries, we do not take lightly the responsibility that is given us and strive to maintain a high level of integrity and professionalism,” Carlson said.

Spiro — who was deputy staff director for health policy at the U.S. Senate Committee on Health, Education, Labor and Pensions (HELP) while the committee was helping to write the bill that became PPACA — argued that the groups predicting that PPACA will lead to dramatic increases in health insurance rates are putting out studies that “lack transparency, are self-serving, and omit key factors.”

The authors of many of the studies are not doing enough to disclosure their assumptions and the underlying data, Spiro said.

Spiro said authors of many of the studies are leaving out the effects of the new PPACA premium tax credits, or subsidies or low-income and moderate-income consumers; the availability of dependent coverage for young adults up to age 26; the availability of catastrophic plans for young adults up to age 30; the effects of the PPACA risk-adjustment programs, which are supposed to protect insurers against claims risk; and the administrative savings that will result from the elimination of tasks such as medical underwriting.

Spiro said that the Lewin Group is predicting that non-employer rates will rise an average of 32 percent, but that the Congressional Budget Office is estimating the PPACA will lower non-employer rates by an average of 7 percent to 10 percent.

In Washington, a review of rate failings suggest that some consumers may be able to buy health coverage for 15 percent less in 2014, Spiro said.

 ”In Oregon, when premium proposals were posted publicly online, two insurers immediately lowered their proposed rates to remain competitive,” Spiro said. “One insurer lowered its proposed rate by 15 percent and another lowered its proposed rate by even more. Clearly, these insurers had been inflating their projected costs; one insurer said its actuarial projections had been too pessimistic.” 

An increase in competition seems to be helping to hold down rates in states like Oregon and could also help carriers push for new discounts on hospital prices, Spiro said.

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