March 28, 2013

162017_132140396847214_292624_nIn a report issued by the Society of Actuaries earlier this month, researchers have concluded that the Affordable Care Act (“ACA”) will raise health care claims costs in the United States by an average of 32% by the year 2017 (assuming that all states expand Medicaid coverage).

The researchers further predict that as many as 43 U.S. states will experience double-digit health care claims costs increases (those states with the largest increases: 80.9% increase in Ohio, 80.0% increase in Wisconsin, 67.6% increase in Indiana, 66.6% increase in Maryland, and 62.2% increase in Idaho). However, some states are predicted to experience decreases in claims costs (13.9% decrease in New York, 12.8% decrease  in Massachusetts, 12.5% decrease in Vermont, 6.6% decrease in Rhode Island, and 1.4% decrease in New Jersey).

What Is The ACA And What Is Its Intended Purpose?

Passage of the “Patient Protection and Affordable Care Act” was a major legislative effort under the first Obama Administration (commonly referred to as “Obamacare”) and became law in the United States three years ago (March 2010), with the stated purpose to expand health insurance coverage to millions of Americans who did not have health care insurance. The ACA attempts to achieve its goals by restricting commercial health insurance carriers from using a person’s health status to deny coverage, to exclude people with pre-existing conditions from coverage, or to vary the premiums charged for coverage.

The ACA attempts to offset the burdens and obligations that it imposes on insurers and employers and to increase participation in health insurance plans by providing for premium and cost-sharing subsidies through a so-called Health Benefits Exchange (“HBE”) along with imposing a tax penalty on individuals who do not purchase sufficiently valuable health insurance coverage. The ACA seeks to expand health coverage in the United States by providing the states with the option to expand Medicaid coverage to almost all adults who fall below 138% of the Federal Poverty Level (“FPL”); by requiring all large employers to offer health insurance to full-time employees or otherwise pay a penalty; and, by providing an incentive to small employers to provide health coverage by providing a tax credit to them to offset the cost of providing health coverage for their employees.

The Society of Actuaries report estimates that 32.4 million of the 52.4 million people who would otherwise be expected to not have health insurance coverage without the ACA will obtain health coverage (assuming all provisions of the ACA are fully implemented in 2014 and that all U.S. states expand Medicaid coverage). Of the 32.4 million who will gain health insurance coverage under the ACA, 10.4 million will do so through the individual exchange, 0.4 million will obtain health coverage through private non-group coverage, 2.2 million will obtain coverage in a Small Business Health Options Program (“SHOP”) Exchange, 5.4 million get coverage through other employer coverage, and 14.0 million will gain coverage through the expansion of Medicaid. However, the 32.4 million estimate is likely an over-estimation because many states have indicated that they will not expand Medicaid coverage.

The Society of Actuaries report stated the following three findings:

1. After three years of exchanges and insurer restrictions, the percentage of uninsured nationally will decrease from 16.6% to between 6.8% and 6.6%, compared to pre-ACA projections.

2. Under the ACA, the individual non-group market will grow 115%, from 11.9 million to 25.6 million lives; 80% of that enrollment will be in the Exchanges.

3. The non-group cost per member per month will increase 32% under ACA, compared to pre-ACA projections.

The Society of Actuaries report, entitled “Cost of the Future Newly Insured under the Affordable Care Act (ACA),” can be read in its entirety by clicking here.

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