Blogger's Note: A shorter version of this article appeared in the Albuquerque Journal Tuesday April 16
Newspapers from the Wall Street Journal to our own Albuquerque Journal have been filled recently with reports of skyrocketing health insurance premiums once the Affordable Care act takes full effect in 2014, or even sooner when policies go up for sale on new insurance exchanges. And you can be sure that if the rates do go up, your first bill from the insurance company will say… “We had to do it because of Obamacare.” But don’t believe everything you read, including what some are now calling “Rate Crock.” There are many safeguards in place to protect consumers and encourage companies to continue covering their employees.
The basic pitch of the chicken littles is that new insurance reforms-- like preventing insurance companies from discriminating against those with pre existing conditions, requiring a decent benefit package, and limiting mark-ups on older consumers to three times (instead of five times) what they charge younger people—will cause them to raise premiums.
That might be the case, but in New Mexico—help is at hand. Estimates prepared by the Lewin Group for Families USA indicate that about 192,000 currently uninsured New Mexicans, most of the working and middle class, will get premium tax credits to help defray the cost of insurance purchased through the exchange. The amount of the credit—which is really a subsidy—will depend upon their income. The smaller the income, the more the credit. The idea, which is embedded in the law, is that families should not be spending a huge percentage of their income on health insurance. (http://familiesusa.org/help-is-at-hand/new-mexico/)
For information on how to calculate premiums and subsidies, the Kaiser Foundation has prepared a handy calculator for folks under 65 who will be obtaining their insurance through the new exchanges. (http://healthreform.kff.org/subsidycalculator.aspx) I plugged a few numbers into the calculator for my 30-year old daughter and found her costs would be much less than what she’s currently paying—contrary to popular warnings that the cost of insurance for young people, especially will skyrocket. In addition, I read the fine print, which indicated that the Congressional Budget Office (a non-partisan operation) projects that average premiums under reform for the same level of coverage for a given group of enrollees would be 7-10% lower than under the status quo. Hmm, quite a different story than we are hearing in the media.
In New Mexico, there’s also the huge group of people (about 150,000) who will be covered by the expansion of Medicaid—where they will not be paying a premium at all. How will that help keep the cost of premiums down? Reducing the number of uninsured reduces cost shifting—i.e. charging insured patients more to compensate for caring for the uninsured. In New Mexico, health policy experts estimate the current surcharge on individual policies for this is over $1,000 per year.
For businesses, especially large businesses, the issues are more complex, and what we are hearing from former opponents of the bill is that companies will be dropping their employees from coverage— and sending them to the newly formed health exchanges. This move would subvert the law’s intention to allow people who like their current coverage to keep it. The rhetoric we are now hearing certainly would encourage employers to do this. But that would be an ideological—and not a rational act. For all you policy wonks out there, a health economist at the University of Pennsylvania (my alma matter) explains why in “The ACA doesn’t squeeze employers.” http://ldi.upenn.edu/incidentaleconomist/2013/04/12/the-aca-doesn-t-squeeze-employers#disqus_comments
There’s one other factor. New Mexico is last in the nation in the percentage of residents who get their health insurance through their employers, according to a study by the Robert Wood Johnson Foundation. Part of the reason is that NM is largely a small business state, where owners are hard pressed to afford to cover their workers. We’ve tried for years at the state level to get them to do it—without success. Now Obamacare offers them several alternatives. They can use the exchange to get coverage for their employees, probably at a lower rate since the larger number of employees in the exchange spreads risk for the insurance companies. Or, they can take advantage of a number of tax credits available for small companies. The Small Business Minority has a nifty calculator, which can be used to figure out how much the credits will reduce the insurance bill. www.smallbusinessmajority.org/tax-credit-calculator/index.php
Yes, the new law is complicated—and it will be fine tuned as time goes on. There will be adjustments needed. Risk pools will change. But there are safe guards, and anyway, I wonder where all these dire prognosticators were for the past decade when premiums were skyrocketing with no control, threatening to eat up as much as 25% of family income by 2025.