Health Insurers Warn on Premiums


Health insurers are privately warning brokers that
premiums for many individuals and small businesses could increase
sharply next year because of the health-care overhaul law, with the
nation’s biggest firm projecting that rates could more than double for
some consumers buying their own plans.
The projections, made in sessions with brokers and agents, provide
some of the most concrete evidence yet of how much insurance companies
might increase prices when major provisions of the law kick in next
year—a subject of rigorous debate.

The projected increases are at odds with what
the Obama Administration says consumers should be expecting overall in
terms of cost. The Department of Health and Human Services says that the
law will “make health-care coverage more affordable and accessible,”
pointing to a 2009 analysis by the Congressional Budget Office that says
average individual premiums, on an apples-to-apples basis, would be

The gulf between the pricing talk from some insurers and the
government projections suggests how complicated the law’s effects will
be. Carriers will be filing proposed prices with regulators over the
next few months.
Part of the murkiness stems from the role of government subsidies.
Federal subsidies under the health law will help lower-income consumers
defray costs, but they are generally not included in insurers’ premium
projections. Many consumers will be getting more generous plans because
of new requirements in the law. The effects of the law will vary widely,
and insurers and other analysts agree that some consumers and small
businesses will likely see premiums go down.
Starting next year, the law will block insurers from refusing to sell
coverage or setting premiums based on people’s health histories, and
will reduce their ability to set rates based on age. That can raise
coverage prices for younger, healthier consumers, while reining them in
for older, sicker ones. The rules can also affect small businesses,
which sometimes pay premiums tied to employees’ health status and claims

The law’s 2014 effect on larger
companies is likely to be more limited. Many of the big changes coming
next year won’t touch them as directly as individual consumers and small
businesses, though some will have to grapple with the cost of covering
more workers or paying a penalty.
The possibility of higher premiums has become the latest focal point
of the political tussle over the health law, which marks its third
anniversary Saturday. Republican lawmakers have held hearings on the
issue, and six GOP members of the House Energy and Commerce committee
wrote last week to more than a dozen insurers asking them to turn over
internal analyses on the law’s impact on premiums and costs.
The insurance industry has also been talking publicly about big potential premium increases in lobbying for tweaks to the law.
The individual market includes about 15 million people, and around
18% of the roughly 149 million with employer coverage were at small
companies, according to 2011 figures from the Kaiser Family Foundation.
The individual market is expected to grow to around 35 million people by
2016 as a result of the law.
In a private presentation to brokers late last month, UnitedHealth Group Inc.,
UNH -1.09% the nation’s largest carrier, said premiums for some consumers buying
their own plans could go up as much as 116%, and small-business rates as
much as 25% to 50%. The company said the estimates were driven in part
by growing medical costs not directly tied to the law. It also cited the
law’s requirements that health status not affect rates and that plans
include certain minimum benefits and limits to out-of-pocket charges,
among other things.

Jeff Alter, who leads UnitedHealth’s employer
and individual insurance business, said the numbers represented a
“high-end scenario,” not an average. “There are some scenarios in which a
member could see as much as a 116% increase or over,” he said, though
others, such as some older consumers, could see decreases. He said the
company dwelled on the possible increases because it was trying to
prepare brokers to speak with clients facing big jumps.
Other carriers have also projected steep rate increases during
private meetings and conversations with brokers. Brokers say they are
being told to prepare the marketplace for small-business and individual
rate increases as carriers get ready to file specific rate proposals and
plan designs with regulators.
Insurers are “not being shy that premiums are going to increase in
2014,” and are urging brokers to “brace our clients,” said John Lacy,
vice president of group benefits at Bouchard Insurance, a brokerage in
Clearwater, Fla. His firm has been hearing from carrier representatives
that individual premiums in Florida could go up 35% to 50%, on average,
and small-business rates around 30%, though it hopes to find strategies
to blunt the impact.
Aetna Inc.,  AET -0.66% in a presentation last fall to its national broker advisory council,
suggested rates on individual plans not being grandfathered under the
law could go up 55%, on average, and gave a figure of 29% for small
business rates. Both numbers included 10 percentage points tied to
medical-cost inflation, not the law. An Aetna spokesman said the numbers
are “still generally in line with what we’ve been estimating,” and
represented the average impact in a typical state.

An official with Blue Cross & Blue Shield of North Carolina told a gathering of
brokers last week that individual premiums could go up by as much as 40%
to 50%, according to brokers who were present. A spokeswoman for the
insurer said “we don’t have final numbers” yet on premiums.
There has long been debate, even among insurance experts, over how
the law will affect premiums. Because the effect is likely to vary,
different measurements can arrive at different conclusions. The CBO
analysis cited by the administration determined that average premiums
for consumers who buy their own coverage would be 14% to 20% lower
because of the law—if the law didn’t change the types of plans they
But the CBO also suggested the law would lead to consumers buying
more expensive plans, largely because it requires coverage to include
certain benefits and limit charges such as deductibles. When this effect
was taken into account, the average premiums would go up 10% to 13%,
the agency said, though subsidies would ease the bite for most people.
The agency also said small-business policies were likely to cost within a
few percentage points of the amount they would have without the law.
Health and Human Services officials say competition among insurers,
as well as provisions to limit their financial risk from attracting
high-cost consumers, will exert downward pressure on premiums, and point
to the tax subsidies that will limit many consumers’ costs.
Subsidies will be available on a sliding scale for people with
incomes of up to four times the federal poverty level—currently $45,960
for a single person and $94,200 a year for a family of four. More than
half of the 35 million people expected to be in the individual market by
2016 are likely to qualify for credits. People whose incomes are around
the poverty level could see almost all of the cost of their insurance
subsidized, while people at the upper end will get only a small discount
toward their premiums.