AHIP’s Ignagni Suggests Health Care Law Won’t Work

July 17, 2012 – 3:45 p.m.

AHIP’s Ignagni Suggests Health Care Law Won’t Work

By John Reichard, CQ HealthBeat Editor

The health care law won’t work unless it is changed or delayed, America’s Health Insurance Plans President Karen Ignagni strongly suggested Tuesday.

There’s still time to make those changes before health insurance exchanges begin offering coverage under the law starting next fall, Ignagni added in remarks at a health policy forum.

Ignagni said the combination of the law’s new insurance industry fees, weak penalties levied on those not buying coverage, rating bands and an essential benefits standard requiring much more generous coverage in the individual market will make coverage unaffordable to the young. She suggested that the essential benefits minimums might have to be phased in over a period of time.

“You need to have the young and the healthy participating in order to assure affordability,” Ignagni told the forum, which was sponsored by Health Affairs.

Without people in their early 20s through early 30s buying coverage, there won’t be enough good risks to offset the costs of older and sicker Americans who in 2014 can no longer be denied coverage because of pre-existing medical conditions or charged premiums that are based on their medical histories.

“The incentives to buy coverage in the ACA [Affordable Care Act] year one is roughly $95,” she said. That’s not enough, she implied, to get enough people to purchase insurance. But there are “productive discussions” at the state and federal level about increasing the incentives to buy coverage, she added.

As examples, she cited the penalties in Medicare Part D and Part B. Under those provisions, the longer beneficiaries delay enrollment, the higher the premiums for prescription drug coverage and doctor care. “We think structured open-enrollment periods are valuable,” she said. “And I know that folks who are operating exchanges in the states and at the federal level are looking at a range of incentives as well.” She didn’t specify what such inducements might be.

“As we move from now toward Jan. 1, 2014, there’s time to talk about provisions that could encourage participation,” she said.

Ignagni also said the fees to be paid by insurers, which she called premium taxes, will increase premiums charged to individuals and small businesses under the health care law (PL 111-148, PL 111-152). Small business premiums will be 3 percent higher as a result, she said. Medicaid and Medicare Advantage plans also will be affected, she added.

Under the health care law’s age bands, rates based on age can vary no more than threefold, she said. Now, rates vary fivefold in 85 percent of the individual market. In other words, older people pay five times what younger people do, whereas under the health care law they would pay three times more.

“That’s the issue we want to point to while there’s time to look at this,” Ignagni said.

The health care law “compresses to 3-to-1 overnight.” Older people will pay lower rates as a result. But for younger people that means higher rates that “will be a challenge,” Ignagni said.

In addition, essential benefits minimums require coverage in 10 categories of services. That’s often more than policies in the individual market cover now, she said. The minimums also could mean lower co-pays for consumers than they typically pay now. For the most part, people buying plans now in the individual market are getting catastrophic coverage in order to pay affordable premiums, she said.

States on their own are assessing the impact of essential minimum benefits on premiums, she said. “This is important to study, to look at where do people stand now in terms of what they are purchasing as individuals or as small businesses, where do they need to go and how do we get them there in what period of time.”

In the dozen or so states developing exchanges, there’s been much discussion about the interactions of these various provisions and their impact on premiums, Ignagni said. “In the end, whether or not the costs are affordable will be very dependent on whether individuals who are young and healthy purchase coverage.”

If Congress could be persuaded to reduce the new fees on insurers, less money would be available to expand coverage or benefits under the law. If lawmakers were to change the rate bands the way AHIP wants, premiums for older Americans would increase. Congress has so far resisted changing any of the revenue-raising fees on the health industry.


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