Health insurance premiums for individual policies will jump by more than 30 percent and small businesses will face double-digit rate hikes for their health plans next year when most of the health care reform known as ObamaCare becomes effective, insurers and actuaries estimated Tuesday.
"There is going to be a rate shock for a lot of people," said Bill Gracey, president of BlueCross BlueShield of Tennessee, the state's biggest health insurer.
"Unfortunately, our young and healthy people may opt out of coverage because their rates are about to go way up -- as much as 62 percent for some healthy, younger males," he said.
The health care reform plan signed into law three years ago last Thursday will broaden health care coverage by expanding Medicaid, creating new health insurance exchanges, offering subsidies for low- and middle-income families and expanding many benefit packages beyond what existing plans cover. Analysts project 32 million more Americans should get health insurance under ObamaCare, which backers claim should help both patients and providers.
But such enhancements will come with a cost, especially in the first year when many unhealthy and uninsured people sign up for coverage and disproportionately require more immediate health care services.
A study released Tuesday by the nation's leading group of financial risk analysts, the Society of Actuaries, estimates medical claim costs nationwide will jump an average 32 percent for individual policies under health care reform.
In Tennessee, BlueCross officials told the Chattanooga Times Free Press on Tuesday they plan in April to file rates for 2014 with average increases of more than 30 percent for individual policy holders and more than 10 percent increases from small group customers. Large employer groups will see smaller increases, although Gracey said they could still be more than this year's increases.
Such rate hikes will represent the biggest dollar increases ever by BlueCross for renewing health insurance plans. BlueCross provides individual policies to about 93,000 Tennesseans, and provides or administers health plans overall to more than 3 million Tennesseans.
For about 70 percent of the state's residents, the higher premiums under ObamaCare could be offset, at least in part, by subsidies for anyone making less than four times the poverty rate, or up to $94,000 a year for a family of four in Tennessee.
"Many have doubted that the plan would ever be fully implemented and we haven't really seen the impact of many of the changes to this point," said Russ Blakely, a Chattanooga heath insurance broker. "The real rate impact, unfortunately, will happen for most customers with their January renewal next year."
Rates for older people may go down even as rates jump for younger customers, however. The new law limits the disparity allowed between the youngest and oldest age bands from the current 5-to-1 ratio to no more than a 3-to-1 ratio.
BlueCross also says it must pay about $200 million more in excise taxes under new fees ObamaCare is charging insurers to help pay for expanded Medicaid and health care exchanges.
The federal law also mandates that health plans include maternity, pediatric, vision and dental benefits not always available under existing plans. The health care exchanges don't allow deductibles above $2,000 for individuals or $4,000 for families.
The Obama administration said the projected rise in medical claims overall in the studies released Tuesday don't consider the cost relief strategies such as tax credits and subsidies to insurers who attract an outsized share of the sick. The projected premium increases also ignore the potential price-cutting effect of competition in new state insurance markets that begin in October.
Health and Human Services Secretary Kathleen Sebelius said some health plans being offered today are so skimpy they can't be compared with the comprehensive coverage available under the new law.
"Some of these folks have very high catastrophic plans that don't pay for anything unless you get hit by a bus," she said. "They're really mortgage protection, not health insurance."
The Associated Press contributed to this report.
Dave Flessner is the business editor for the Times Free Press. A journalist for 35 years, Dave has been business editor and projects editor for the Chattanooga Times Free Press, city editor for The Chattanooga Times, business and county reporter for the Chattanooga Times, correspondent for the Lansing State Journal and Ingham County News in Michigan, staff writer for the Hastings Daily Tribune in Nebraska, and news director for WCBN-FM in Michigan. Dave, a native ...