NASE News

Reform May Increase Health Costs, Studies Find

A few recently released studies on the health care reform law have found that while more Americans will have health insurance coverage because of the law, the legislation may lead to increased health costs.

Economic experts at the Health and Human Services Department (HHS) reported that while the health reform law will extend coverage to 34 million people, it will raise projected spending by about 1 percent over the next decade, and possibly more as Medicare cuts in the law may be unsustainable.

Administration officials say the increase in spending is a price worth paying to guarantee coverage to 95 percent of Americans, and also point out that the legislation will decrease the federal deficit by $143 billion over the next 10 years.

The Congressional Budget Office (CBO) found in a review of the legislation that in 2017-2019, the penalties on individuals for not buying health insurance would bring in $4 billion a year. However, the review said that about three-quarters of that money would come from individuals with an income of less than $60,000 per year and families with less than $120,000 in annual income, leading to criticism from Republican lawmakers that middle income families are going to see their taxes go up to pay for health reform.

A report from Medicare’s Office of the Actuary acknowledged that cost-control measures in the law such as Medicare cuts, a tax on high-cost insurance and a commission to seek ongoing Medicare savings could help reduce the rate of cost increases after 2020, but was not hopeful for progress in the next 10 years. In the report, Medicare’s chief actuary indicated that the increased costs associated with the expansion of health insurance coverage will likely outweigh the savings from these cost-control measures.

Some insurance industry leaders are saying the law will cause faster and greater premium increases than before. Mark Bertolini, president of Aetna, said that Americans with employer-sponsored coverage could be facing higher premiums as early as the upcoming fall open enrollment period when mandated near-term coverage changes will be implemented. Bill Hoagland, Cigna’s vice president of public policy, said the law will increase premiums by 1 percent to 1.5 percent, on top of the annual increases in premiums that consumers have been paying as employers and insurers try to offset rising costs by shifting more coverage expenses to workers. The insurers also indicated that other measures such as the elimination of all life-time caps of insurance coverage and the implementation in 2014 of a provision barring insurers from rejecting people with pre-existing conditions could raise premiums as well.

Additionally, changes to insurers’ policies beyond the federal law mandated by some states, such as California and Colorado, could also increase premium rates for consumers in January 2011.