Straight talk about health care reform: Health insurance premiums

The Patient Protection and Affordable Care Act, which became law in March 2010, is one of the most sweeping pieces of legislation since the creation of Medicare and Medicaid, and perhaps inevitably, there has been much misinformation about the law and its provisions.

One area of misunderstanding has been the impact of reform on health insurance premiums. Many Coloradans seem to think that recent reforms have greatly contributed to the high costs of premiums.

The Colorado Division of Insurance and State Insurance Commissioner Marcy Morrison have received phone calls and emails from angry consumers who believe that insurance companies are hiking up premiums because of national health care reform.

To the contrary, according to Morrison. In a press release from the Colorado Department of Regulatory Agencies on November 4, 2010, she said: "It's a hot issue for many people, and we figured the best way to address the rumors was to publish the facts, so people could see for themselves what is driving the price of health insurance. What we found isn't surprising: health insurance premiums continue to rise. But what may be eye-opening for some people is that federal health reforms have contributed from 0 to a maximum of 5 percent of those increases. It's not the primary cause for increasing rates." (1)

Here's a breakdown:

• If you have individual coverage or are self-insured, premium increases resulting from health care reforms will range from 0.3% to 4.9%.
• If your coverage is through a small business (with 50 or fewer employees), the maximum increase would be between 0% and 4%.
• If your coverage is through a large employer (more than 50 employees), costs will increase from and 0% to 1.4%. (2)

Colorado's results confirm what has been projected for some time. According to a July 2010 issue brief from the Robert Wood Johnson Foundation, "It is fair to say that the provisions implemented in 2010 will have very little effect, in general" on individual and small-group premiums. (3)

Prior to the passage of the national health care reform law, premium costs were steadily increasing. The Kaiser Family Foundation, found that average annual premium costs for employer-sponsored health benefits have increased by 45.5% for single coverage and by 43.3% for family coverage between 1999 and 2009, the year before the passage of national healthcare reform. (4) In another Kaiser survey released in June 2010, people who purchase their own insurance and are not covered by an employer reported that their latest premium adjustment went up by an average of 20 percent. (5)

There are many reasons for higher premium costs: people are using more health care, more visits and tests are being scheduled, the average health of Americans is worsening, and the population is getting older. But according to Morrison, Colorado's insurance commissioner, there are business and other reasons as well. "We see companies who use aggressive pricing at one point to be competitive, but they will adjust premiums in future filings to increase their profits the following year. And there are inefficiencies that need to be corrected. Government programs, as well as the private sector, need to look at their operations and make improvements to keep costs down." (6)

Overall, premium increases resulting from national health care reform in Colorado are comparatively small when separated out, and they certainly are not the sole reason behind rate hikes. One thing is certain, premium costs will continue to increase if nothing is done. The national health care reform law will not be fully implemented until the end of 2014, but many of its provisions have real potential to at least reduce the growth of premium costs. The Robert Wood Johnson issue brief concludes, "Reforms designed to promote competition and contain costs will tend to lower premiums over time, relative to the no-reform case." (7)

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(1) Colorado Department of Regulatory Agencies, Nov. 4, 2010, Federal Health Reform Accounts for less than 5% of Health Rate Increases in Colorado
(2)Colorado Department of Regulatory Agencies, Nov. 5, 2010, Effect of New Federal requirements on Colorado Health Insurance Premiums
(3) Blumberg, Linda J., Robert Wood Johnson Foundation, How Will the PPACA Impact Individual and Small Group Premiums in the Short and Long Term? July 2010
(4) Kaiser/HRET Employer Health Benefits 2009 Annual Survey
(5) Kaiser Family Foundation: Survey of People Who Purchase Their Own Insurance, June 2010
(6) Colorado Department of Regulatory Agencies, Nov. 4, 2010, Federal Health Reform Accounts for less than 5% of Health Rate Increases in Colorado
(7) Blumberg, Linda J., Robert Wood Johnson Foundation, How Will the PPACA Impact Individual and Small Group Premiums in the Short and Long Term? July 2010