Health Premium Increases Damped by Greater U.S. Scrutiny

Photographer: Andrew Harrer/Bloomberg

Aetna Inc. Chief Executive Officer Mark Bertolini warned of “premium rate shock,” while speaking at a December conference with analysts. Close

Aetna Inc. Chief Executive Officer Mark Bertolini warned of “premium rate shock,” while... Read More

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Photographer: Andrew Harrer/Bloomberg

Aetna Inc. Chief Executive Officer Mark Bertolini warned of “premium rate shock,” while speaking at a December conference with analysts.

The number of requests by health insurers for double-digit rate increases fell about 41 percentage points since the end of 2009, according to a U.S. report that cited the success of the health-care overhaul.

The data today by the U.S. Department of Health and Human Services showed one-third of requests last year asked states to approve premium increases of more than 10 percent. In 2010, three-quarters of petitions sought double-digit jumps, according to the report, which compared 15 states in 2012 with 11 in 2010.

The 2010 Affordable Care Act requires companies such as UnitedHealth Group Inc. (UNH), the country’s largest health insurer, to have premium increase requests of 10 percent or more reviewed by state or federal regulators, a provision the U.S. said has kept prices in check. America’s Health Insurance Plans, the main industry lobbying group, said the Obama administration may be taking too much credit, citing already changing behaviors by insurers, hospitals and doctors.

“Health insurance premiums are not set arbitrarily,” Robert Zirkelbach, a spokesman for the Washington-based insurers group, said in an e-mail. “They are developed using established actuarial principles that take into account a variety of factors, including increases in medical costs, changes in the covered population, and new benefit mandates and regulations.”

Health plans “are partnering with hospitals and doctors” to change payment in ways that “reward quality and better health outcomes,” he said. They are also helping patients with chronic conditions such as diabetes better care for themselves, and are promoting more preventive care, he said.

Unprecedented Scrutiny

A similar study in October by the Menlo Park, California- based nonprofit group Kaiser Family Foundation found “reasons to believe that the ACA may have had an effect” on reducing premium increases. The Obama administration today said the law meant that for the first time, insurers in all states couldn’t raise rates without some degree of accountability.

“The Affordable Care Act brings an unprecedented level of scrutiny and transparency to health insurance rate increases,” the Health and Human Services Department said in its report. The law “contributed to a reduction in the rate of increase in premiums,” it said.

The Obama administration said separately in a regulatory filing today that full implementation of provisions in the health law next year that require insurers to cover anyone who seeks a policy won’t cause large premium increases, as some insurers have predicted. Aetna Inc. (AET) Chief Executive Officer Mark Bertolini warned of “premium rate shock,” while speaking at a December conference with analysts.

Sick Customers

Starting in January 2014, insurers must cover anyone who wants to buy a policy, regardless of their health. New marketplaces called exchanges under construction in every state are supposed to sell coverage to people who don’t get it through work. The Congressional Budget Office estimates that 27 million Americans who would otherwise be uninsured will eventually gain coverage under the law.

Bertolini said in December that new taxes imposed by the law and its insurance reforms, including the prohibition against denying coverage to sick people and limits on what plans can charge old people compared to the young, will cause premiums to as much as double for some customers.

Overhead Costs

In a final rule issued today enacting the insurance changes, the government said the law will lower administrative and overhead costs for insurers because applications will be easier to process and they won’t have to pay for medical underwriting, now used to determine whether sick people should be offered coverage and at what price.

“This, in turn, could contribute to lower premium rates,” the government said.

Health insurers lost their fight today on the issue of how much they can charge older customers, called age rating. The health law prohibits plans from charging older customers more than three times what they charge younger ones, beginning next year.

The insurance industry has argued this may mean a 29 percent premium increase for 21- to 29-year-olds, who tend to be healthier and thus cheaper to insure than older people. Insurers had asked the Obama administration to phase-in the requirement or delay it, to avoid a sudden spike in young Americans’ premiums on Jan. 1. The government provided no such relief in its rule.

“This increases the likelihood that younger, healthier people forgo purchasing insurance until they are sick or injured,” Karen Ignagni, president and CEO of Zirkelbach’s group, said in a statement.

To contact the reporter on this story: Alex Wayne in Washington at awayne3@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net

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