Reform Won’t Inflate ’11 Rate

When U.S. Health and Human Services Secretary Kathleen Sebelius fired off a letter to the president of the nation’s health insurance plans, stating the impact of ObamaCare on health insurance premiums should be minimal, she was talking about Greater Madison more than most areas. Sebelius also warned insurers there would be zero tolerance for blaming what she views as unjustified rate increases on the new health care law, but area health insurers aren’t particularly worried the law will cause a significant spike in the premiums that employers pay in 2011 — largely because area insurers already have adopted many of the mandates contained in the new law.

What the future holds beyond 2011 is less certain as regulators continue to write the rules, and insurance companies have to operate on their guidance because legislation typically leaves out important operational details needed for compliance. Several ObamaCare provisions already have gone into effect, including: the end to lifetime coverage limits; parents have the option of keeping their adult children covered on their family plans until age 26; the prohibition of denying coverage for a pre-existing medical condition for children under age 19; and with some exceptions, free preventive care benefits, which means no more co-payments, co-insurance, or deductibles for routine care.

Nationally, the first round of ObamaCare mandates could add 2% to 5% to projected 2011 plan costs, according to Hewitt Associates. Although other local insurers peg it lower for their premiums, that range is on the mark for Physicians Plus, according to President Linda Hoff, who also is CFO for Meriter Health Services. Insurers will simply bear the cost of new mandates, according to Hoff. "You may have a company that has some cost sharing on preventive care, maybe a $10 or $20 co-pay to have that care, and now it’s no longer possible to cost-share with your employee," she noted. "You must have that fully covered by your health insurance plan, and that was not anticipated when we established our premiums for employers back on Jan. 1, or in some cases we’re in multi-year contracts with employers."

John Trochlell, VP of actuarial, underwriting, and plan development for WPS Health Insurance, said the state of Wisconsin made several changes to health plans, including coverage to non-married dependents up to age 27, before national legislation passed. "We got started down this path to make a number of benefit and eligibility changes," he noted, "and federal reform kept up the momentum."

Trochlell said the WPS premium increase linked to ObamaCare would, on average, be 2% or less, depending on the extent to which current benefits differ from what is required. "If you had a lean plan that didn’t cover the first dollar of preventive services, you could see more of an increase," he said.

Robert Palmer, president and CEO of Dean Health Plan, agreed that ObamaCare’s short-term impact on premiums would be minimal — about 1% — due to state mandates or plan changes like the removal of lifetime limits, which refer to the the total cost of care over the lifetime of the insured. "Between mandates and things that have already been done voluntarily, there isn’t much of an adjustment that has to be made," Palmer said.

Area health insurers expect to meet a requirement to pay a minimum of 80% of the premiums they collect toward medical care. Al Wearing of Group Health Cooperative, who expects ObamaCare to add less than 1% to 2011 premiums, said the only risk is a change in the formula for determining administrative costs. "If they start putting things we consider claims back in administration, that could run a risk for us, but we feel comfortable with that requirement."

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