Opinion

A PPACA blow to 11 million workers

There’s a lot of throat-clearing, background and more, so you have to read the whole thing before you get to the bottom line.

I’m talking about a new report from the Centers for Medicare & Medicaid Services, a six-page piece in which you’ll have to either wade through thousands of words or just skip to the end for what is, truly, a sad ending.

What it reveals is that about 11 million Americans on small employer health insurance rolls will see increases in premiums as a result of the Patient Protection and Affordable Care Act. Yes, some people, it says, will no doubt see savings, but not nearly as many as those who’ll end up paying more.

Even when the PPACA subsidies are considered, it’s safe to say this is not one of those reports that the Obama administration wants flogged on Fox, or anywhere else for that matter.

And, actually, if you’ve read the thing, there are a few other rather damaging acknowledgements and admissions in the text that employee benefits brokers and their customers might welcome, if only because they finally represent a few key points that critics have been making for some time.

To wit:

“Small businesses with 50 or fewer workers may find terminating existing coverage particularly attractive since they are not required by the ACA to offer affordable minimum essential health insurance coverage, and their workers have access to health insurance in the new exchanges.

“Alternatively, it may be financially attractive for small employers with relatively healthy employees to continue to provide coverage but convert to a self-insured arrangement with stop-loss coverage. If such coverage becomes widely available, some analysts expect a substantial increase in self-insured small employers.”

If such coverage becomes widely available? Last I looked, there was plenty of stop-loss available and if Congress would simply pass the Self-Insurance Protection Act – legislation that would ensure regulators cannot redefine stop-loss insurance as traditional health insurance – things will turn out just fine. (I’ve written on this topic before, so you can click here for the background).

In any case, CMS had a few more things to say about premiums to help explain why so many people should brace for rate shock.

It pointed out that before Obamacare, insurers could set lower premiums for small employers with younger and healthier employees due to their low expected health care needs, and significantly higher rates for small employers with older and sicker employees with greater expected health care needs.

The ratio of premiums charged between old and young ages was typically 5 to 1 or more, and could translate into much higher premiums for firms with older employees. In addition, gender could also be used as a rating factor. Before 2014, employers with more women of childbearing age were commonly charged higher premiums.

As we all know, the community rating allowed under the PPACA doesn’t permit the use of gender, health status and claims history as rating factors, and restricts the premium rating ratio for adults to between young and old ages. All of this is supposed to make insurance less costly to the elderly and the ill – at the expense, of course, of the young and healthy.

Of course, none of this is unexpected.

A study from Milliman estimated that, before the application of tax subsidies, small-group premium rates would go up by as much 15 percent. The good people at Oliver Wyman predicted that small-group premium rates will jump by 20 percent.

So, what are we to do with all of this, aside from gnashing teeth? It’s an incredible long-shot but I’d like to see the PPACA age rating factor adjusted to even the playing field. There’s just nothing fair about asking the young and healthy pay more while the sick and elderly pay less.

The range now on premiums based on age should more closely align with utilization, plain and simple.

It’s no doubt too late to do anything this year. We’ll start to see spikes in the employer-sponsored market in the second half of 2014. But perhaps some measure of relief will come in 2015, so long as we get a good outcome in this November’s election.

About the Author
Allen Greenberg

Allen Greenberg

Allen Greenberg is the retirement industry news editor at BenefitsPro.com. Follow him via Twitter @AllenGreenberg. Email him at agreenberg@benefitspro.com or call 720-895-3965.

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