Quick Facts about Health Care Reform and Premiums

AHIP Coverage reports:

“Given recent attention on the impact of health care reform on health care costs and premiums, we wanted to share the following facts:

  • The impact the ACA will have on premiums will vary considerably depending on a where a person lives, what coverage they have today, and their age, gender, and health status.  Simply looking at averages does not explain what these changes will mean for a particular person in a particular state.  To learn more about the wide variation in impact, visit www.TimeforAffordability.org/changes.

  • When examining the impact of the ACA on premiums, it is important to consider the wide variation in impact across states.  According to a previous Society of Actuaries (SOA) study, “the significant state-by-state variation can be attributed to many factors, including whether or not the state sponsored a high-risk pool, differences in current underwriting practices, and demographic characteristic and income level differences in state populations. In simplest terms, the states that will see large increases generally have low current individual costs and those showing decreases have high current individual costs, with all states moving closer together but at a higher level overall.”  For more, view Society of Actuaries: ACA Impact Will Vary “Substantially Across State Lines”.
  • A new AHIP infographic, The Facts about Health Plan Administrative Costs and Profits, highlights the fact that premiums are driven primarily by the underlying cost of medical care and not health plans administrative costs and profits.
  • The MLR is not simply a cap on health plans’ profits, salaries, and marketing costs.  The MLR caps any expense that does not go directly to pay for medical care or is not included on a pre-approved list of “activities that improve health care quality.”  As a result, this regulation places an arbitrary cap on what health plans can spend on a variety of programs and services that improve the quality and safety of patient care, help patients navigate a complicated delivery system, and help control soaring medical costs.  Check out AHIP’s Coverage blog: Medical Loss Ratio – What You Need to Know.
  • To help put the $500 million in MLR rebates in perspective, the ACA’s new health insurance tax alone will increase premiums by $8 billion next year, increasing an average family’s premium by more than $350 in 2014.