Sebelius concedes reform could raise premiums

By March 27, 2013 • Reprints

Years after the insurance industry began warning that premiums will
rise due to health reform, the Obama administration acknowledged
Tuesday that it might actually be the case.

Health and Human Services Secretary Kathleen Sebelius told reporters
at the White House that some people may see their premiums rise under
the Patient Protection and Affordable Care Act.

“These folks will be moving into a really fully insured product for
the first time, and so there may be a higher cost associated with
getting into that market,” Sebelius said. “But we feel pretty strongly
that with subsidies available to a lot of that population that they are
really going to see much better benefit for the money that they’re

Sebelius’s comments were published online late Tuesday by the Wall Street Journal.

“This is the first time ever in the history of the United States that
insurance companies have to file their rates, it has to be very
transparent, they have to offer the same kind of coverage without 5,000
tiny little lines and internal caps, and they have to compete for
customers,” Sebelius said. “And I am a believer in the market strategies
that in and of itself will minimize the rate impact.”

Health insurers have long warned that health reform will increase
health coverage costs, but the Obama administration has repeatedly said
reform will increase coverage while reducing costs.

Though the law eliminates practices that have imposed higher rates on
women and people with medical conditions—likely reducing premiums for
women, the elderly and the sick—premiums for men, healthy individuals
and younger beneficiaries are expected to increase. Insurance premiums
could rise for some with individual plans, Sebelius said.

In a report, the Society of Actuaries predicted this week that
insurers will pay 32 percent more on average within three years for
medical claims under reform, as more patients enter the insurance market
and take up higher-value benefits. The study attributes potential
premium hikes to the expected influx of sicker people into the health
care market. Changes also would vary significantly by state.

“Health care reform’s watershed year is almost here, though it will
take a while for a stable state to be reached. The projections in this
study suggest that when the dust settles by 2017, we can expect mixed
results on the reform bill’s goals of expanding coverage and reducing
costs,” Kristi Bohn, consulting health staff fellow at the Society of
Actuaries, said in a statement.

Though the law will significantly reduce the number of Americans who
are uninsured, the size of the individual market will more than double
an increase driven in part by people who are below 200 percent of the
federal poverty line coming into the market. “This group of people are
considered to be ‘good risks’ and are generally expected to bring down
average costs,” Bohn said. “But other changes in composition of the
individual market will more than offset these lower costs, and in fact,
will drive average costs up.”

America’s Health Insurance Plans has also argued that PPACA’s age rating restrictions will increase premiums for younger individuals, while the health insurance tax will significantly increase costs for consumers and employers in all 50 states.

The bulk of the law—including the health exchanges and the individual
mandate—goes into effect in January 2014, which at that time the
premium costs will be known.