ObamaCare’s impact on health costs.

Out-of-pocket spending is a controversial topic in healthcare. On the one hand, the purpose of insurance is to reduce the financial impact of adverse events, like illness and injury, so higher out-of-pocket costs mean insurance is providing less protection. On the other hand, with little or no exposure to costs, a patient might over-consume healthcare, going to doctors for minor illnesses that could be self-treated, or getting screening tests – or even surgical procedures – that aren’t really necessary. In the latter case, the incentive effects of out-of-pocket payments might reduce wasteful healthcare spending and leave spending that is truly necessary mostly unaffected. The result would be a reduction in overall healthcare spending.

When exposure to out-of-pocket costs rises, which effect actually dominates? A recent study in JAMA Internal Medicine gives a hint of what happens, and it’s not looking good for incentive effects in the world of the Affordable Care Act (ACA).

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This year, premiums were up an average of 8 percent. In many states, double-digit premium hikes were the norm.

 Next year, they’re likely to be even bigger, according to Marilyn Tavenner, the former chief of the Centers for Medicare and Medicaid Services under President Barack Obama and current head of the insurers’ main trade group — America’s Health Insurance Plans.
There are less costly ways to make sure that all Americans have access to coverage — and that they can afford it. They’re called “high-risk pools” and they can protect those with pre-existing conditions without jacking up premiums for everyone else.
Obamacare was supposed to ensure affordable health coverage through two related provisions — “guaranteed issue” and “community rating.” The first forbids insurers from denying anyone a policy, and the second prevents them from charging anyone any more than three times what they charge anyone else.
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The GOP House blueprint for health reform repeals these taxes. Specifically, the report cites:

  • the 3.8 percent bracket in the Medicare payroll and self-employment tax
  • the 3.8 percent “net investment income tax” (NIIT) on savings and investment
  • the additional 10 percentage point surtax for non-qualified health savings account (HSA) withdrawals
  • the “medicine cabinet tax” which denies the use of pre-tax HSA, health reimbursement arrangement (HRA), and flexible spending account (FSA) dollars for the purchase of non-prescription, over-the-counter medicines
  • the $2500 cap on medical FSA deferrals
  • the “Cadillac plan” tax of 40 percent on high cost health insurance plans
  • the “health insurance tax” (HIT)
  • the tax penalties associated with the individual and employer mandates
  • the medical device excise tax
  • the industry tax on pharmaceutical companies
  • the “high medical bills tax” which disallows an itemized deduction for medical expenses for millions of middle class families
  • a tax on employers helping their retired employees purchase Medicare Part D plans

In presidential politics, party professionals on both sides of the aisle live in fear of the dreaded “October surprise” that can compromise their candidates’ chances.

In 2016, the joker in the deck may come the first week of November — and it won’t be a surprise, just a shock: Fueled by the requirements of the Affordable Care Act, Americans’ health insurance premiums are likely to spike.

The policy debates that preoccupy Beltway insiders are often far removed from the concerns of most American voters. The Export-Import Bank, the intricacies of the Dodd-Frank financial regulatory requirements, quantitative easing, and rules promulgated in obscure administrative agencies — this is not the stuff of middle-class anxiety. While such policy and regulatory decisions do affect citizens nationwide, it’s not always immediately obvious how. Not so jobs, wages, schools, and health care — these issues hit home.

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Medical costs will continue to grow at a mostly flat rate next year, PwC’s Health Research Institute projects in a report released today.

Costs will grow at roughly 6.5 percent in 2017, in line with 2016 trends, the report says. Growing use of convenience care and increased access to behavioral health services will increase costs, while an increased number of high performance networks and increasingly aggressive pharmacy benefits managers will counteract that. The study looks at spending for Americans with employer-sponsored health insurance. More than half of Americans are covered through employer-sponsored plans.

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A new report from the Kaiser Family Foundation says the cost of the “benchmark” plan (the second-lowest-cost silver plan in a market, which is the price used to calculate subsidies) will go up 10 percent this year, double the rate at which prices increased last year. The lowest-cost silver plans are also seeing substantial hikes. This matters because these are the most frequently purchased plans.

The usual caveat applies to these preliminary requests: Regulators might not approve them. But that caveat was hauled out last year by the law’s supporters, who seemed to think that this was simply the opening stage of a negotiation in which insurers asked for the stars in the hope of settling on the moon. In fact, regulators approved large rate hikes, and the state of Oregon actually made some insurers raise rates by more than they’d planned.

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While it will be months before insurers and regulators agree to final rates for the coming year, a new Kaiser Family Foundation analysis confirms the signals we have seen from industry and government experts — that consumers and the federal government are likely to see much higher prices in many markets. Clearly, insurers are struggling to figure out how much to charge so they can cover their costs but still attract customers.

As health care reporters, we’ve been debating exactly how worried one should be about the fate of the Affordable Care Act, known informally as Obamacare, in the face of steep rate increases next year.

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The White House is urging states to be more aggressive against health insurance companies as it looks to prevent expected and widespread premium hikes of 10 percent or more this year.

The federal health department announced Wednesday that it will dole out about $22 million to boost state-level “rate reviews,” considered one of the strongest weapons against premium increases.

Under the system, health insurers are required to justify rate increases to state insurance departments, some of which have the power to reject “unreasonable” increases. With the new funding, federal health officials hope states can hire outside insurance experts to dig deeper into the proposed rates and prove the hikes are unjustified.

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Next year’s premiums for health coverage under the Affordable Care Act could rise more than in past years in most markets and declines might be rare, according to a preliminary analysis of insurers’ plans.

Overall, premiums for a popular type of plan — the second-lowest silver plan — could rise 10 percent on average next year in 14 major metropolitan areas, according to an analysis released Wednesday by the Kaiser Family Foundation. Kaiser based its projections on insurers’ preliminary rates filed with state regulators, which remain subject to state or federal review. (KHN is an editorially independent program of the foundation.)

Last year, premiums for the second-lowest silver plan in those metro areas rose 5 percent after state insurance departments signed off, Kaiser said.

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More than half of the states have disclosed just how much higher their health care premiums could be next year under the Affordable Care Act, and some of the potential increases are jaw-dropping.

But Illinois residents won’t get their first look at proposed 2017 premiums until Aug. 1, and that has consumer advocates frustrated.

Insurance companies had to submit rate plans for Illinois in April, but the state doesn’t require the proposals to be made public upon filing, according to the Department of Insurance. In addition, the director of the department considers health plan filings confidential and exempt from Freedom of Information requests.

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