We last reported in on the changes in US health care in an April blog. At that time we looked at the number of businesses providing insurance to their employees and the costs of health care in the US as it compared to other industrial nations. It was not a pretty picture; health care costs here are higher than in other nations and the number of employers providing insurance is going down. Some developments this month actually look better and may provide a partial explanation of the earlier cost findings.
A story in the Washington Post caught our eye when it suggested that the Affordable Care Act – Obamacare if you prefer – was driving insurance premiums down for small business in Washington, D.C. A little research indicated similar headlines coming from New York State. It appears that, as the insurance exchanges move toward operational status, the premium costs are coming in lower than expected. In the other Washington, as the Insurance Exchange there has been posting the plans offered by carriers, costs have been dropping steadily with individual carriers even revisiting and lowering their earlier premium offerings. A similar situation is going on in Maryland where insurance costs are coming in nearly one-third lower than expected. The article goes on to note:
“The Department of Health and Human Services recently evaluated proposed insurance premiums in 11 states, reporting that prices for small-business plans in those states have come in an average of 18 percent lower than the premiums employers were paying prior to the Patient Protection and Affordable Care Act.”
How, one might ask, can costs be going up and premiums coming down? One explanation could be that the number of uninsured people in the system was driving prices higher as health care providers needed to recover the costs of uncompensated care. Uncompensated care in U.S. hospitals went over the $41 billion mark in 2011, according to the American Hospital Association (AHA); there is a corresponding number for physician’s services, but it is hard to find. The people who have been funding this uncompensated care are: (1) people with insurance and (2) people without insurance who pay their medical bills. As underwriters look at the impact of increasing the insured population and consequently reducing uncompensated care and distributing the actual costs of services to a broader base of insured people, it appears they are anticipating the ability to reduce claim costs. That and market completion are two effects policymakers had in mind when proposing universal health insurance and it appears to be leaning that way, at present.
It may not be all good news. Some states have special circumstances that may impact the potential savings. Alabama, for example, is a state where one carrier has a majority of the market and any impact from competition may take time to develop. Washington State was thought to be in that category for different reasons. Our state had already instituted community rating and guaranteed issue in the 1990’s and a pretty depressing Forbes article suggested we were in for price hikes of up to 80%.
The evidence from the state suggests otherwise. The Washington Insurance Exchange has just published information about the health insurance plans and rates to be offered here. There are nine carriers that have proposed rates and the rates are “competitive and are lower than previously expected.” This is pretty good news for Washington State and some further evidence that the Affordable Care Act may, indeed, live up to its name.