Water Falls From Sky. People Get Wet.

Cause and effect.  Stand in the rain and you will get wet.  We get that.  We aren’t surprised, normally, when 1 plus 1 gets us 2.  But human nature will, at times, have us rooting for a different result.  There are times when we desperately want to be able to walk between the rain drops or somehow add 1 plus 1 and get 5.  Or even 6!  And we are surprised, shocked, when we get wet. 

The Cleveland Plain Dealer carried a wire story yesterday by Noam N. Levey.  The P.D. headline was Health care premiums to rise?  In the Los Angeles Times it was States worry about rate shock during shift to new health law.  You’ll want to read the Times’ version.  It is fifteen paragraphs longer. 

Some of the biggest proponents of the Patient Protection and Affordable Care Act  (PPACA) have suddenly realized that health insurance premiums are about to increase.  A lot.  How much?  No one really knows for certain.  The plan’s advocates are openly nervous even though they appear to be soft-peddling the full extent of the problem. 

Affordable care is in the eye, or wallet, of the beholder. 

Oregon’s insurance commissioner, another supporter of the law, said new regulations could push up premiums for young customers by as much as 30% next year.  He urged administration officials to slow enactment of the new rules.  

Noam N. Levey

State insurance commissioners across the country have focused on the increased benefits built into all of the policies, the elimination of underwriting, and the new age/rate ration as particularly troublesome.  Young, healthy males in their early 20’s now pay about 1/5 the price of healthy males in their early 60’s.  The new law reduces the ratio to 1:3.  Will the rates decrease for the 60+ year olds?  Maybe a little.  So to hit the ratio, the rates for the young must increase. 

The ratio change impacts the young disproportionately.  Ending underwriting and adding maternity, and lots of other new benefits described in previous posts, will also escalate premiums.  Still, fans of the PPACA maintain that young people will gain enough in benefits to offset the cost. 

How does a 25 year old afford a $250 to $300 monthly premium?  Subsidy!  Americans who don’t receive their health insurance from their employers may qualify for a federal subsidy.  The subsidy is available to people earning up to four times the federal poverty level which is about $92,000 for a family of four.  Curious about how much subsidy you might get?  Check out the online calculator created by the Kaiser Family Foundation.  It is really easy to use. 

So the government passed a law, makes a lot of rules and regulations, pushes up insurance premiums, and then lots of us get a subsidy.  It would appear that everything is in balance.  For once, a happy ending! 

Not so fast.  The money for the subsidy has to come from someplace. 

$101,700,000,000 over ten years is a good down payment for the PPACA.  $101.7 billion doesn’t cover the actual cost of the President’s plan, but the Health Insurance Tax (HIT) is a key element.  The HIT is a tax charged to insurance companies on fully insured health policies.  These are the policies covering individuals, the self-employed, and small businesses.  Medicare Advantage and Medicare Part D (Rx) contracts are also affected.  This tax will be passed directly to the consumer. 

The 2011 Oliver Wyman projection was ugly.  The ten year total cost projections:

•   $2,150 – Single coverage
•   $5,080 – Family coverage
•   $2,760 – Small group single employee
•   $6,830 – Small group family
•   $3,590 – Medicare Advantage beneficiary
•      $161 – Medicare Part D (Rx) participant 

Adding $15 to $20 per month for a single or $40 to $45 per month for a family won’t help to make insurance more affordable.  But at least we know where the government is getting all that money for those subsidies.  For now. 

Representative Charles Boustany (R-LA) and Representative Jim Matheson (D-UT) have introduced bi-partisan legislation to repeal the Health Insurance Tax.  

The President’s health care law is full of hidden tax increases. Beginning in 2014, millions of American small businesses will be subjected to a new health insurance tax (HIT) coming at a cost over $100 billion. This tax will close many small businesses and kill jobs once implemented. The HIT will cost each affected family an average of $5,000 in higher premiums over the next decade. The Jobs and Premium Protection Act prevents premium increases for small businesses and protects jobs by repealing this unfair tax. It keeps more money in the hands of small business owners and employees instead of levying higher taxes on job creators and American workers. I encourage my colleagues to join in honoring our commitment to protect small businesses and the millions of workers and families depending on them.

Congressman Charles W. Boustany, Jr., M.D., (R-South Louisiana) after introducing “The Jobs and Premium Protection Act” 

Will the tax close small businesses?  Probably not.  Will Boustany/Matheson pass the House?  Probably.  Would a similar bill pass the Senate?  NO!  If the cost of insurance is your biggest concern, this tax and the legislation to repeal it are relevant.   If the government spending money it doesn’t have is your major concern, then you will want to see the tax enacted. 

New benefits, the elimination of underwriting, the age/rate ratio, and the new Health Insurance Tax all add significantly to the cost of health insurance as of January 1, 2014.

Surprised?  Really?  Let me get you an umbrella.

DAVE

www.cunixinsurance.com