KHI News Service

Brownback and premiums for individual health insurance policies

Experts say some increase likely due to health reform, but it won't be the big cost driver

By Mike Shields | October 20, 2010

GOP gubernatorial candidate Sam Brownback has pledged, if elected, to fight the federal health reform law.

In statements earlier this month he spelled out some of the reasons why. This is the third story in a series of five examining those reasons.

Brownback's claim: “182,000 Kansans in the individual health insurance market will see premium rate increases of up to 49 percent based upon a BlueCross/BlueShield study and other analysis.”

This is the third in a series of articles examining claims by Republican gubernatorial candidate Sam Brownback about the impact of federal health reform in Kansas. Watch this space throughout the week for other stories in this package.

Part One: The Affordable Care Act and state Medicaid spending. (Monday)

Part Two: Health reform and Medicare Advantage plans. (Tuesday)

Part Three: Health reform and individual insurance premiums. (Wednesday)

Part Four: Health reform and taxes. (Thursday)

Part Five: Health reform and business. (Friday)

Other factors

Insurance company officials, regulators and policy analysts agree that the health reform law will contribute to higher premiums for individual policyholders, but not to the extent claimed by the Brownback campaign.

A spokesperson for Blue Cross Blue Shield of Kansas, the state's largest health insurer, said the company had not provided information to the Brownback campaign.

“The cost of health care is going to go up, with some percentage of that attributable to health reform,” said Mary Beth Chambers of Blue Cross Kansas. “But the vast majority of that (increase) is related to utilization and health care costs, not health reform.”

Chambers declined to predict how much average increases would be in the coming plan year for Blue Cross Kansas customers in the individual market.

“Averages are somewhat misleading,” she said. “Some will pay more, some will pay less...but if someone is getting a 49 percent increase then there are other factors than health reform.”

The large majority of Americans with private insurance are covered by employer-based group plans. But roughly 5 percent of Americans purchase their health coverage directly in the individual, or non-group market. Many are self-employed or unemployed.

In 2007-2008, most of the 6.5 percent of insured Kansans who weren't covered by group plans had individual coverage, according to the Kansas Health Institute's Annual Insurance Update 2010.

In a memo earlier this year, the Kansas Health Policy Authority estimated that the reform law would help 73,000 previously uninsured Kansans acquire individual coverage, mostly through the health insurance exchanges to be created in 2014.

Wyman report

In follow-up questions, a Brownback spokesperson said the Blue Cross report cited to buttress the campaign's claim came from Tennessee. Campaign staffers could not produce that report, but instead provided a press release from the national Blue Cross Blue Shield Association released in December 2009 during the height of the congressional debate over health reform and months before the final version of the law was passed.

The press release cited an actuarial report by Oliver Wyman commissioned by the national Blue Cross association.

The report mostly argued for a strong mandate or requirement that people have health insurance, but critics accused it of being a self-serving product of the health insurance industry.

In any event, the Wyman report did not state that Kansans with individual insurance would face increases up to 49 percent.

Instead, it concluded that without a “strong mandate” requiring health insurance, the reform law could increase individual insurance claims by 50 percent, which would then drive up premium costs.

Wyman also predicted that subsidies included in the new law, “will entirely or partially offset these premium increases for some individuals. Eight million current individual market members and 25 million uninsured earn between 100 and 400 percent of the federal poverty level and will have access to subsidies through the exchange.”

About 90 percent of the approximately 347,000 Kansans without health insurance are expected to either qualify for the subsidies or for Medicaid, which will be expanded in 2014 to include those earning up to 133 percent of federal poverty guidelines, or $24,352 for a family of three.

Out-of-pocket costs

Unmentioned by Brownback was the fact that even without health reform, people in the individual market have faced large and steady premium increases.

The Kaiser Family Foundation earlier this year reported that although there is little good information about individual premium costs and benefits, what information there is suggests that people with individual policies pay more of their own health care costs in the form of co-pays, deductibles and other out-of-pocket expenses.

Kaiser surveyed more than 1,000 people with individual policies; 77 percent reported their insurance companies had increased rates. The average increase was 20 percent.

The reform law includes provisions intended to curb those increases and to assure more complete coverage for those with individual policies.

For example, starting this year, insurers no longer will be allowed to limit annual or lifetime benefits or deny coverage to children because of pre-existing medical conditions. Those protections will be extended to adults in 2014.

The government-approved private plans marketed through the exchanges will include caps on out-of-pocket expenses. The caps will vary depending upon the purchaser's income level.

Starting next year, insurers also must demonstrate to regulators that at least 80 percent of premium costs are devoted to health care services or they will be required to pay rebates to policyholders. Experts say some insurers currently spend as little as 54 percent on health care in their individual plans.

Better benefits, increased premiums

The improved benefits under the law will account for some percentage of premium increases, according to Linda Sheppard of the Kansas Insurance Department.

“As far as future rate impact, we are no doubt going to see some percentage of increase related to implementation of PPACA (The Patient Protection and Affordable Care Act),” Sheppard said. “Since the companies have to provide additional or richer benefits than they have provided in the past, there is going to be a cost associated with that. The rates are going to reflect that additional cost.”

Annual increases for individual policies vary company to company, person to person. That was the case before and after health reform.

According to the Kansas Insurance Department, annual base rate increases for individual premiums since 2007 among Kansas' leading insurers have ranged from 0 percent to 19 percent.

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