Health Care In The States

State Insurance Officials Raise Concerns About ‘Rate Shock’ For Young People

By Susan Jaffe

December 4th, 2012, 5:30 AM

If young adults can’t afford health insurance policies available in 2014 under the health care law, state insurance officials are worried they won’t buy them.  And that could drive up the cost of insurance for the mostly older, sicker people who do purchase coverage.

That’s a potential problem even in states like California and Rhode Island, which are moving ahead to carry out the law, state officials told representatives of the Obama administration Friday at a meeting of the National Association of Insurance Commissioners. They said they’re concerned that young people facing insurance “rate shock” may opt to pay a relatively modest penalty — $95 in the first year — rather than pony up thousands of dollars to purchase coverage.

“We are very concerned about what will happen if essentially there is so much rate shock for young people that they’re bound not to purchase [health insurance] at all,”  California insurance commissioner Dave Jones, told federal health officials. “It is a big problem for those of us, like in California, who are moving forward very aggressively to implement this [health law] and want to be successful.”

The law requires insurers to charge premiums to older beneficiaries that no more than three times what younger people would pay. The provision will control costs for those up to age 64 who may have expensive health conditions, but it also forces up rates for younger plan members.  That’s the way most insurance works, with cheaper members helping to offset the costs of more expensive ones.

But the concern is it may be too much, too fast.

“Is there any way to find some wiggle room on age rating to implement it over a two- or three-year period?” asked Sandy Praeger, the Kansas insurance commissioner, who also chairs the National Association of Insurance Commissioners’ health insurance and managed care committee.

A more “gentle phase-in” of the age rating rule will help avoid rate shock and encourage young people to enter the insurance market sooner, she said.

Christopher Koller, Rhode Island’s health insurance commissioner, echoed those concerns, which NAIC first raised when Congress was debating the health care legislation in 2009.

But the government may not have much leeway, replied Gary Cohen, director of the Center for Consumer Information and Insurance Oversight, which is part of the U. S. Centers for Medicare and Medicaid Services. “The statute is pretty clear.”

Then he punted the question back to the commissioners.

“We welcome comments on the rule — both on the policy implications and the reasons why people would like to see a different outcome — but also on what the legal pathway might be that we would employ to get there assuming we agreed on the policy,” he said.

There are some things that may cushion rate shock for younger people: At least some of those with low incomes will qualify for subsidies. Moreover, insurers that sign up a higher-than-average proportion of sicker people can get premium stabilization subsidies to reduce costs at the high end.

“And eventually they won’t be younger and healthier; the law of averages will catch up with them,” Praeger said.  “As much as they might think it’s good to have to have the lower rates, these protections will protect them too.”

10 Responses to “State Insurance Officials Raise Concerns About ‘Rate Shock’ For Young People”

  1. Paul says:

    Who said Obamacare was perfect? Most intelligent people knew, as it is with most new legislation, healthcare reform would need adjustment going forward. Morons believe otherwise. That doesn’t mean we throw it out and go back to Republican style fee-for-service healthcare where private insurers controlled the entire industry and you fended for yourself. Republicans liked that old system that ran in the dark and if you got sick and couldn’t afford insurance, that’s your tough luck!

  2. John Spek says:

    it gets more interesting

    Consumers’ expenses may climb because of a cost-cutting provision inserted in the law that will reduce federal aid to the uninsured if the subsidies exceed a certain threshold —defined as 0.504% of the gross domestic product. The Congressional Budget Office says it expects that will happen.

    In 2019, some families could see their premiums climb four times as quickly as the help they receive from the government, according to CBO. That means they will have to bear a larger share of the burden of purchasing coverage.

    “That will be a major challenge,” said John McDonough, a public health professor at the Harvard School of Public Health. “It makes the affordability picture far worse.”

  3. Jane says:

    Actually “morons” are those who believe that the answer to the health crisis is to force people to buy insurance from scummy insurance companies.

  4. Paul says:

    Good point Jane…

    What you need to do is keep your focus on the big picture. Obamacare is just a small step down the long road of an eventual single-payer healthcare system. Even the staunch GOP members of the Simpson/Bowles commission admitted that the only real answer to America’s healthcare cost containment problem is to eliminate the private insurance system and go to a universal single-payer system. Many single-payer proponents call for Medicare to accept more and more members into the system and lower the age threshold over time. It’s been proven that, compared to the private insurance industry, Medicare runs 4 to 5 times more efficiently and effectively. Not to mention the fact that Medicare is non-profit so the executives get paid government salaries rather than the millions and millions the private executives get in salaries and bonuses and there are no dividends to pay shareholders with Medicare. It’s coming Jane, it’s just a matter of time!

  5. scott says:

    Please do not cite facts that you make up. Medicare is the most inefficient and ineffective insurance program currently in place. Why do you think it is virtually bankrupt? The government does not run a single system that is not wrought with fraud and inefficiency. The Post Office, Social Security, Medicare and Medicaid, FEMA, Amtrak to name just a few. Wake up people.

  6. Ron says:

    Yes, bring on single payer Paul, just like in Europe. I can’t wait to wait 2 years for hip replacement. I’m sure the pain will be wonderful. Who cares if i have to wait 2 months to see my doctor for a checkup either? I’m sure whatever’s wrong with me will wait and not get worse before the doctor sees me. People who believe government is more efficient than private business in providing anything are ignorant of facts and history.

  7. bob says:

    Time will tell if we will be better off. I think we will be paying more for less. What’s next? Mandatory disability insurance!

  8. Marcia says:

    It will be interesting to see if the Feds can budget the health insurance subsidies promised folks that go to the exchange because their employer (under 50 full time employees) decides to drop coverage and they earn up to 400% of the poverty level projected to be $44,680 for a single person/$92,200 for a family of four. I don’t feel real good about contributing toward the cost of coverage for a family making $92,200 a year. We saw health care costs skyrocket over the last 40 years because people with insurance were insulated from the cost because they have insurance to pay the bill. All we are doing with this model is shifting the burden to the taxpayer for a huge population that will qualify for subsidies. Personal responsibility for lifestyle decisions should be part of the solution. Reform legislation was drafted by well intentioned individuals (well, at least some), however, they missed the mark in my humble opinion. The complexity of administering provisions of the ACA are overwhelming, even to large companies. Just the regulations to determine who is deemed part time/seasonal and maybe eligible for benefits is 18 pages and reads like a comedy routine of who’s on first. Good grief!

  9. Health care insurance is really important for every family. But, it will be good enough if the rate will constantly remain affordable to the individuals so that anyone can avail it according to their budgets.

  10. MattM says:

    Young people to get sticker shock by the implementation of ObamaCare? Tough. Elections have consequences and they overwhelmingly voted for this.