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CMS actuaries: Health premiums might be 6.4% higher

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U.S. private health insurers may take in $1.1 trillion in premium revenue this year, up 6.4 percent from the 2013 total.

Or, maybe not.

Analysts in the Office of the Actuary at the Centers for Medicare & Medicaid Services (CMS) have tried to come up with new National Health Expenditure (NHE) projections, for a paper published in Health Affairs, a peer-reviewed health finance journal.

See also: Forecasters see 13 percent health insurance spending jump

This year, Sean Keehan and other study authors are predicting that total NHE spending will increase 5.3 percent this year, to $3.2 trillion, or about 18 percent of 2015 U.S. gross domestic product (GDP), and that per-capita health spending will increase 4.4 percent, to about $17,980.

See also: CMS analysts: Health cost growth falls again

The CMS analysts are expecting spending most types of health care services and products, other than the products sold at retail outlets, to increase about 4 percent to 6 percent, and the average increase in NHE will be 5.3 percent from 2016 through 2018.

The actuaries say the net cost of health insurance, the difference between the revenue private health insurers take in and the amount the insurers pay for actual health care, will increase 11.2 percent this year, to about $223 billion.

The federal government may account for about $898 billion of health spending this year, the actuaries say. If that estimate is correct, federal health spending may amount to about 27 percent of the federal government’s $3.3 trillion in 2015 revenue, down from 38 percent in 2009.

See also: CMS: Federal Health Spending Amounts to 38% of 2009 Revenue

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But the latest real-world spending survey figures the CMS analysts had to feed into their projection models came from 2013, before many major Patient Protection and Affordable Care Act of 2010 (PPACA) health system changes, such as the Medicaid expansion subsidies and new commercial health insurance underwriting and product design rules, started to take effect.

CMS analysts now say the actual NHE spending amounted to $2.9 trillion in 2013. That’s about what the analysts were estimating in the NHE forecast published about a year ago.

The current estimate of 2013 spending on private health insurance premiums is about $962 billion, or about 1.5 percent more than what the analysts were estimating last year.

The analysts’ net cost of insurance estimate for 2013 has dropped to about $174 billion, which is about 0.5 percent less than what the analysts were estimating a year ago.

See also: CMS analysts: Health cost growth falls again

Last year, the analysts noted that PPACA had added uncertainty to the NHE forecasts. The analysts have included a longer discussion of PPACA-related uncertainty to the new NHE paper.

The indirect effects of the law “on the market for health care remain highly uncertain, including the behavioral response to reform on the part of consumers, insurers, employers, and providers throughout the projection period,” the analysts say. 

The analysts say economic conditions could also throw off the NHE projections.

The Great Recession that hit in 2008 may have contributed to the recent slowdown in health care spending increases, and the recent economic recovery may lead to an acceleration in health spending increases, the analysts say.