PPACA’s Impact on Affordability

A March 2013 report by the Independent Society of Actuaries (SOA) forecasts that the individual market could experience as much as a 32% cost of care increase on average due to changes enacted by the Patient Protection and Affordable Care Act (PPACA). The resulting premiums would be dramatically increased as those costs would be passed on to those who purchase health insurance. According to the report,

  1. After three years of exchanges and insurer restrictions, the percentage of uninsured nationally will decrease from 16.6% to between 6.8% and 6.6%
  2. Under the ACA, the individual non-group market will grow 115%, from 11.9 million to 25.6 million.
  3. The non-group cost per member per month will increase 32 percent under the ACA.

According to the SOA report some states could experience dramatic rate changes. The study illustrates rate changes by 2017 on a pmpm (per member per month) basis. Some of the most extreme are as follows:

  • 80% increase in Ohio & Wisconsin
  • 68% increase in Indiana
  • 67% increase in Maryland
  • 62% increase in California
  • 60% increase in Alabama
  • 1.4% decrease in New Jersey
  • 6.6% decrease in Rhode Island
  • 12.8% decrease in Massachusetts
  • 13.9% decrease in New York

In Missouri the forecast indicates a 55-58% increase contingent on the expansion of Medicaid. In Illinois the anticipated market impact is approximately a 50.8% average increase.

Many supporters of the health care law are now lashing out citing close ties between the SOA actuaries and the insurance industry. The administration claims the analysis fails to consider cost relief strategies in the law such as premium tax credits and the risk adjustment pools that would help subsidize health insurance carriers that attract higher shares poor risk.

However, insurance experts have countered that neither measure actually cuts the cost of the claims pmpm. These measures in the law merely transfer funds from the federal budget to individuals or shift funds generated through tax revenues to insurance companies. Meaning there is no true cost cutting only cost shifting with the aggregate costs actually being greater.

The study did not directly address PPACA’s impact on “large employer” groups (defined as >100) and focused on the individual and small group market.

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About Christopher Johnson

Christopher manages the consulting services department of J.W.Terrill providing regulatory, analytical, technical and wellness support to clients.

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