The Patient Protection and Affordable Care Act of 2010 has already brought significant changes to the nation’s health care system.
Those changes are most evident in the “patient protection” part of the law. The “affordable care” part, however, is expected to be a greater challenge.
Metro Atlanta’s large employers watched the per-employee cost of health insurance go up by 140 percent during the past decade, from $3,877 in 2001 to a projected $9,316 for 2011. The employee’s contribution went up as much as 275 percent during that same period, and those costs won’t be slowing down in 2011: Hewitt Associates forecasts that the per-worker cost of coverage next year will go up another 8.7 percent, the biggest jump in six years.
And that’s just the view from big companies. People who must resort to individual or small-group insurance plans are seeing equally dramatic increases: Since 2009, Blue Cross Blue Shield of Georgia has notified the state of its plan to raise premiums on 21 plans covering more than 180,000 Georgia individuals and families. The average increase: 20 percent.
“They said, ‘This is the rate, you can take it or leave it,’ ” said Atlanta radiologist Edwin S. Gerson.
Doctors need health insurance just like everybody else, and Gerson was unhappy with the 14 percent increase he got this year from Blue Cross Blue Shield of Georgia. He’d held the policy for six months, had paid his premiums and had only filed a couple of claims for lab work. Those claims didn’t come close to meeting his high deductible, so Gerson didn’t actually cost the insurance company anything, he said.
As a doctor, Gerson has intimate knowledge of how the market works. But as a health insurance consumer in Georgia, Gerson found that he was virtually powerless.
Impact of overhaul
The national health care overhaul could have three possible impacts on insurance prices. The first is that the new law will hold down costs; the second is that it will have no effect — costs will just keep rising as they have for the past five or six decades; the third is that the law itself will drive prices even higher.
Proponents say the new law hasn’t had a chance to start restraining the growth in premiums. But they say the trendlines will flatten after major provisions of the law take effect in 2014.
“There’s plenty of evidence that we are going to be able to contain costs,” said Meena Seshamani, deputy director of the Office of Health Reform at the U.S. Department of Health and Human Services.
But opponents say that the law ended up doing very little to control spending on health care. They say the overhaul is actually driving costs even higher by placing more requirements on insurers.
“Failing to address health care costs is laying the groundwork for the nation’s next financial crisis,” said Robert Zirkelbach, spokesman for America’s Health Insurance Plans.
Most of the players in health care agree on what is driving up the costs: expensive new technologies and drugs cause some of the increase, as does an aging and less healthy public that needs more care.
The economic downturn made the problem worse: More people were uninsured and left hospitals with lots of unpaid bills for emergency room care. And insurers found that those on their plans tended to be sicker than in the past, as healthy people short of cash opted to drop their coverage for a while.
But advocates for reform and those working in health care disagree about whether the new law will tackle these problems or actually make the situation worse.
The law relies on dramatically reducing the nation’s uninsured population. Currently, when an uninsured person seeks care from a doctor or hospital, the doctor or hospital must recover the cost of treating that patient by increasing rates for patients who can pay. Giving people coverage will enable them to get routine health care and stop seeking expensive, crisis-driven care in emergency rooms.
The law also envisions new insurance marketplaces in every state for people who now buy individual and small group coverage.
The marketplaces, which will open in 2014, are supposed to increase competition and create a vast pool of insured people that will spread out the risk, and make small plans less vulnerable to one person’s expensive illness.
Setting up the new marketplaces in every state will be complex.
Experts do not expect the market-driven system to start pushing down premiums until 2018, said William S. Custer, a Georgia State University professor who is an insurance expert.
But David Merritt, an expert on health policy at Newt Gingrich’s Center for Health Transformation, predicted that the cost containment won’t materialize.
He said that President Barack Obama campaigned on changing the health care system to reduce costs, improve quality and expand insurance coverage.
“What they did through the health reform law is almost exclusively focused on expanding coverage,” Merritt said.
The law is already making the problem worse, he said.
The first provisions of the law, which took effect in September, ban lifetime caps on benefits and no longer allow insurers to consider pre-existing conditions of children when writing coverage. Insurers must also pick up the tab for preventive services, without charging consumers co-insurance or co-payments, and allow parents to add adult children up to age 26 to their policies.
“Talk to any business about how it is going to impact their bottom line and they will tell you they are looking at much higher costs because they have to comply with the law,” Merritt said.
Cobb County insurance consultant Gary Bottoms said his clients are facing premium increases between 1.2 and 30 percent for next year, with the typical increase between 8 and 12 percent.
The businesses have resorted to making changes in their plans every year and passing a larger share of the cost to workers.
“It depends on the income level of the employees, but it’s gotten to the point for quite a few of our clients where the employees can’t bear any more of the cost,” Bottoms said.
“Everybody is strained.”
Rate review in Georgia
Some states already closely review price increases, with about half requiring insurers to get state approval before increasing premiums.
Georgia does not.
The lack of oversight shocked Gerson, the Atlanta doctor. He said he got no explanation for his 14 percent premium increase from Blue Cross, so he turned to the state for answers. He asked the state Insurance Department to investigate and to check specifically for issues identified by insurance regulators in other states.
Gerson quickly learned that Georgia’s reviews are virtually nonexistent.
State law requires only that insurers notify the state insurance commissioner of plans to increase premiums for individual policies.
At least for now, more aggressive reviews are not likely. Georgia was one of five states that did not even apply for a $1 million federal grant available to help each state beef up its rate review system.
“Where’s the accountability?” said Gerson, who has been waiting since August for detailed information about the finances of Blue Cross Blue Shield, including its reserves. In other states, some insurers have enacted rate increases while holding onto large surpluses.
Insurance Commissioner John W. Oxendine said he has for years requested the power from the Legislature to do more to protect consumers when it comes to the cost of health coverage, but lawmakers turned him down.
“Our authority over health insurance rates is very minimal if not negligible,” Oxendine said.
For individual plans like Gerson’s, insurers simply determine how much more they want to charge and file that information with the Insurance Department — no advance approval is required. Oxendine said he can order companies to cover the cost of hiring actuaries to review their books. But he said Georgia law doesn’t permit him to cut rates just because he believes profits are too high.
“Our authority is so limited, we would have to find them doing something sinister [to order an adjustment],” Oxendine said. “Just charging a high price would not violate the limited laws that we have.”
Oxendine said he did not apply for the $1 million rate review grant because he prefers that companies, not taxpayers, cover the cost of rate reviews. And he said he didn’t want to put Georgia on the hook for any potential federal requirements for advance approval of rates, even though he sees a need for the reviews.
Gerson said Oxendine made the wrong decision.
“The preponderance of the evidence points to the fact that our Georgia office of the commissioner of insurance is not interested in Georgia consumers,” Gerson said.
Review uncovers mistake
The Obama administration points to a California case to illustrate the need for state reviews of rate increases.
Last winter, Anthem Blue Cross of California argued that it needed to increase premiums on 800,000 individual health policies by as much as 39 percent because of the rising cost of care.
California’s insurance commissioner hired a team of actuaries to review the numbers. They discovered an incorrect calculation by the company, which prompted an embarrassed Anthem Blue Cross to cancel the hikes.
“Light is going to be shined on insurance company practices to make sure an increase is justified,” said Seshamani, of the U.S. Office of Health Reform.
Rate review is only one early attempt to curb the cost of insurance.
Seshamani said each state’s online insurance marketplace should save individual and small groups 14 to 20 percent on the same coverage by dramatically reducing administrative costs.
The law will also require insurance companies to pay a set percentage of the premiums they collect on claims, thus limiting their overhead expenditures and, in theory, encouraging the companies to operate more efficiently. Many consumers, based on their incomes, will also become eligible for credits that will help cover the cost of their insurance premiums.
Medicare and Medicaid will also be used to test new methods of paying for care, to try to achieve both lower costs and better results.
Proponents say that these many approaches to reducing health care expenditures will work, once implemented. Others say the measures simply won’t result in the relief that businesses and families need after years of escalating insurance bills.
“I know there are arguments on both sides of the equation,” said Bottoms, the Cobb insurance consultant.
“But we don’t see anything that you can really say is going to lower the cost of health care in the future. We just don’t see that.”
About the Author
Carrie Teegardin is a reporter and part of the investigative team at The Atlanta Journal-Constitution. She is a graduate of Duke University and has won numerous national journalism awards.
