Our Canary Died

Alarm bells.  Warning lights.  Bespectacled insurance agents jumping up and down and waving our arms.  The last three years have had no shortage of dire predictions.  Most have been ignored.  The warnings were coming primarily from Republican leadership and insurance agents.  Our motives were suspect.  Though many in my industry offered possible modifications to the Patient Protection and Affordable Care Act (PPACA) to make the law more workable, the Republicans only offered to repeal the legislation, a totally impossible political grandstanding ploy.  With the choice appearing to be all or nothing, the American public chose all.  

The canary died last Tuesday. 

The Society of Actuaries released their study on March 26^th.  Their prediction is an average increase of 32% in 2014 in the individual health insurance market.  That is the average.  New York policies may decrease an average of 13.9%.  Ohio?  You don’t want to know.  The Society of Actuaries is looking at an 80.9% increase for Ohio individual policies. 

Does this mean that your policy is going up 80%?  Yes and no.  If you are really, really unhealthy, your premium may be decreasing.  If you are young, healthy, and have a good job – this could get ugly.  If you are young, healthy, have a good job, and male – this could get very ugly. 

How much of this increase will you see?  The answer depends, in part, on your income.  The Obama administration is counting on federal subsidies to hide the full impact.  With assistance available to consumers earning up to 400% of the national poverty level, lots and lots of Americans will be getting help. 

Where will all of that money come from?  Individual policies will have two new fees (taxes) assessed on them as of January 1, 2014.  The Reinsurance Fee adds $5.25 per insured member per month.  That means that a family of four pays an additional $21 per month.  The second fee is the new Market Share Fee which is projected to be an additional 2 – 3% of premium.  The rest of the money will come from federal taxpayers. 

The Obama administration has responded predictably to the actuaries’ report.  Health and Human Services (HHS) Secretary Kathleen Sebelius admitted that “there may be a higher cost associated with getting into that market where folks will be moving into a really fully insured product for the first time.” 

That moment of clarity was quickly followed by questions about the canary.  The Christian Science Monitor reported that Secretary Sebelius said that “it’s too soon to talk specifics about premiums until the insurance companies submit their bids this summer”.  She again predicted that the online exchanges will encourage competition which would bring down prices.  And of course, the White House has questioned the motives and validity of the study. 

I am particularly amused by the competition argument.  Large corporations, many of them publicly traded, are going to lose millions, not by accident, but because they will be blindly caught up in a bidding war to insure our sickest Americans.  A little real world capitalism is going to be a real shock to some of our Washington bureaucrats. 

My own policy, a high deductible H.S.A. qualified health plan, renewed recently.  My rate increased over 30% and yet, the premium is still competitive.  Claims, taxes, new charges like the facility fees that are now appearing on our bills, and the incredible cost to comply with the new legislation are all contributing to this year’s increases.  Next year?  I suspect that 30% will be a fond memory. 

Damn.  Our canary died.

DAVE