Impact of new health-care law in dispute in Tennessee

9:05 PM, Jun 14, 2013   |    comments
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By Paul C. Barton, Gannett Washington Bureau

WASHINGTON-- With less than seven months until President Barack Obama's health-care reforms take full effect, Tennessee Republicans in Congress contend steep premium increases, job losses and denial of access to needed care lie in wait for constituents.

But liberal policy analysts say such claims reflect an insurance industry scare campaign and that significantly increased access and more competitive and stable premiums will be the story.

No matter which side proves right, the social welfare and political consequences for the state could be immense.

"Some states are clearly in better shape to implement the act and to assist their residents in getting coverage in a timely fashion than are other states. It could be ripe fodder for election campaigns," said Bruce Oppenheimer, Vanderbilt University political analyst. "And once people start reaping the benefits, it will be near impossible to remove or repeal those benefits."

As proof of pending rate-shock, however, the state's Republican lawmakers' cite projections such as:

  • Blue Cross-Blue Shield of Tennessee, the state's largest insurer, saying premiums will go up an average of 30 percent for individuals and 10 percent for small businesses.
  • A Society of Actuaries projection that medical claims costs will go up an average of 46 percent per subscriber in Tennessee and average of 32 percent per subscriber nationally.
  • The American Academy of Actuaries projecting premiums on individual policies for ages 21-29 will increase an average of 42 percent while those for 30-39 will increase an average of 31 percent.
  • A report from the Republican-controlled House Energy and Commerce Committee
  • "The Looming Premium Rate Shock" that summarized rates 17 large insurers say they plan to charge in 2014 and projects average premium increases of 96 percent nationwide for new entrants in the individual market and up to 50 percent in the small-business market.

At an Energy and Commerce hearing earlier this year, Rep. Marsha Blackburn, R-Brentwood, said the Patient Protection and Affordable Care Act - aka "Obamacare" - had already caused small business after small business in her district to experience widely varying double-digit rate increases, forcing some to either lay off workers or restrict their hours.

"That's a jobs program for you isn't it?" Blackburn said. "So what do you tell these employers that are trying to do the right thing? You thought health insurance was expensive before. What do you tell them now? That it's exorbitant?"

Republican Sen. Lamar Alexander says the latest projections justify the warning he gave to Obama when he and other lawmakers held a face-to-face with him in February 2010, about a month before the Affordable Care Act became law. Alexander pleaded with the president to start over.

"Our country is too big, too complicated, too decentralized for Washington - a few of us here just to write a few rules about remaking 17 percent of the economy all at once," he said, adding, "We've come to the conclusion that we don't do comprehensive well."
And Sen. Bob Corker, also a Republican, said, "The Tennessee doctors, hospitals and insurance companies who have met with me and my staff are concerned health care costs will increase dramatically for both individuals and small businesses."

Corker said individual rates could increase as much as 70 percent and rates for small businesses as much as 50 percent.

The state's largest insurer, Blue Cross-Blue Shield, said the law will provide coverage for hundreds of thousands who lack it now.

"We think that's a really good thing," said Roy Vaughn, vice president for corporate communications. "We're going to make sure it works as well as possible for Tennessee."
Meanwhile, analysts at liberal think tanks and advocacy organizations, as well as other industry observers, contend congressional Republicans and insurance companies distort what's going to happen by focusing on rates for younger Americans, and not even portraying those accurately.

For starters, they say, don't blame the health care law for increases taking effect recently.
"Health insurance premiums have been going up by double digits for most Americans for years," said Wendell Potter, a former Cigna executive turned industry whistleblower. He said companies routinely raise premiums in part "to ensure a certain profit margin."
They also raise rates, he said, to "purge" small businesses who report significant medical costs among their employees, something the Affordable Care Act would stop.

In a letter to Blackburn, Potter suggested purging was likely behind the rate increases she cited for small firms in her district. He said he has gotten no response.

Added Ron Pollack, head of Families USA, a health care advocacy group: "It's a convenient thing to say it's because of the Affordable Care Act."

Secondly, groups like Pollack's say early returns from states that have already set up their own health exchanges or centralized marketplaces instead of leaving the task to the federal government as Tennessee has shown even more competitiveness in premiums than expected.

Further, they add, rate-shock surveys coming from conservatives and some industry sources feature proposed rates, not those regulators would necessarily approve or that consumers would pay once they go through the underwriting process.
And policies they cite focus on those sold to younger Americans who can't get coverage through an employer or government program, defenders of the health law contend.
"Unfortunately, those tactics are being used again, this time to scare people into believing that their premiums will skyrocket, if we don't perform radical surgery on the the health care law," Potter said.

The entire individual market, he said, involves only about 15 million people out of a U.S. population of 315 million.

Further, those proposed rate increases don't account for offsetting federal subsidies, available to those with incomes under 400 percent of the federal poverty guideline: $45,960 for an individual and $94,200 for a family of four. The subsidies, awarded by the Internal Revenue Service in the form of tax credits, will go directly to the insurers.

As a result, a majority of those 20-29 who buy coverage in the individual market already would easily qualify for either "significant premium credits" or perhaps Medicaid, the federal-state program for the poor, according to the Center on Budget and Policy Priorities.

Blue Cross-Blue Shield of Tennessee estimates 70 percent of state residents fall under the 400 percent of poverty level line.

For most who take part in the exchange, "their cost of individual coverage will go down," said Vaughn, the Blue Cross-Blue Shield spokesman.

Only a "some relatively small number of people" in the individual market the young and healthy who already enjoy the best rate from insurers - are likely to face a higher premium in 2014, the CBPP says.

But it will be for "a far more comprehensive policy," said Sarah Lueck, health policy specialist at the center. "In other words, (there will be) real peace of mind and a backstop if they face expensive illness or an accident."

For instance, she said, those who have pre-existing conditions will no longer be barred from coverage and there will be limits on out-of-pocket expenses.

Potter, the former Cigna executive, said a lot of insurance now marketed to younger Americans is "junk" that leaves purchasers running to bankruptcy court at the first sign of major medical costs.

Illustrating the law's complexities, however, was recent testimony before Energy and Commerce by Christopher Carlson of the worldwide actuarial firm Oliver Wyman.

Carlson acknowledged the overall projections of the American Academy of Actuaries, which he helped produce, failed to account for the subsidies.

And most in the individual market would be eligible, he said. But, Carlson said, even with subsidies some of the young will still see higher premiums than they would otherwise, due to the essential benefits required of all policies.

And under the law's individual mandate, those who don't obtain coverage for themselves face tax penalties.

"Our analysis raises questions as to whether younger individuals will perceive coverage as cost effective," Carlson said.

On the other hand, he said, aspects that raise rates for some of the young such as limits on price advantages for being youthful and in good overall health will reduce rates for Americans 40-65, amounting to "a cross-subsidy from the young to the old."
Contact Paul C. Barton at pbarton@gannett.com

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