HHS Study Claims Big Premium Savings As Result of Reform Law; GOP Disagrees

The health reform law will save middle-class families and small businesses thousands of dollars a year in health insurance premiums by 2014, according to a report released Jan. 28 by the Department of Health and Human Services.

“The report shows that the health law will bring major savings for families as it begins to take shape,” HHS Secretary Kathleen Sebelius said in a telephone press briefing. A middle-class family getting health insurance through the state health insurance exchanges that will be created under the Patient Protection and Affordable Care Act (PPACA) in 2014 could save as much as $2,300 a year on their coverage compared with what they would have paid without the law, she said.

When added to new tax credits and cost-sharing assistance under PPACA, a family of four with an annual income of $33,000 could save nearly $15,000, according to the report, Health Insurance Premiums: Past High Costs Will Become the Present and Future Without Health Reform.

“Across the country the growth of health care costs has slowed,” Sebelius said. States are taking aggressive action against significant premium increases, “and insurers are reporting that after years of dropping coverage, more small business owners are purchasing coverage for their employees,” she said.

Republican lawmakers criticized the HHS report as being misleading. “This report would be laughable if it wasn't so disingenuous,” House Ways and Means Committee Chairman Dave Camp (R-Mich.) said in a statement.

The HHS report is based on estimates from a Nov. 30, 2009, letter from the Congressional Budget Office to former Sen. Evan Bayh (D-Ind.) analyzing how premiums would likely be affected by passage of PPACA. PPACA was enacted in March 2010.

The CBO analysis found that unsubsidized premiums would likely rise by 10 percent to 13 percent in the individual market compared to rates without the law. CBO broke its rate findings into three categories, finding that increased required benefits would raise costs 27 percent to 30 percent, while insurance market changes and increases in the number of insured would reduce costs by 14 percent to 20 percent. The HHS analysis included only CBO's estimates of cost savings, leaving out the estimates of cost increases, Camp said.

Sen. Michael B. Enzi (R-Wyo.), ranking member of the Senate Health, Education, Labor and Pensions Committee, also said in a statement that the HHS report “ignores CBO's conclusion that premiums will increase by $2,100 for families purchasing coverage.” The HHS report “cherry-picks some data” from the CBO letter, “but omits the section demonstrating that mandated benefit packages will actually increase premiums,” he said.

Lambrew Denies Report Is Misleading.

Asked about the discrepancy at the press conference, Jeanne Lambrew, senior adviser to the secretary for health reform, denied that the report is misleading.

“There are choices for individuals in the exchanges, so they can choose bronze, silver, gold, and platinum plans, as well as a high-deductible plan for young adults,” Lambrew said at the press briefing. She referred to actuarial ratings on the types of plans that will be available in the exchanges. “There are many choices, including low-cost choices in the exchange,” she said.

Families that purchase insurance benefits in the exchanges that are similar to what they currently have will save up to $2,300 per year, Lambrew said. “It's basically an apples-to-apples comparison,” she said. “The good news for families is that they can choose more generous options if they want to. But that would be their choice.”

But Camp, in his statement, said the report's conclusion was reached by “ignoring the fact that if they did not buy the better coverage they would be forced to pay the new individual mandate penalty because their coverage would not meet the law's requirements for minimum coverage.”

“This report is as deeply flawed as the $2.6 trillion health law that the American people continue to oppose,” Senate Finance Committee ranking member Orrin G. Hatch (R-Utah) said in a statement.

America's Health Insurance Plans President and Chief Executive Officer Karen Ignagni issued a statement saying that the HHS report “overstates the cost savings associated with certain provisions of the new law and ignores major provisions that will raise premiums,” such as taxes on high-premium plans, age rating restrictions that will raise prices for younger workers, and benefit mandates that exceed the coverage that many people have today. While PPACA expands coverage to millions of Americans, it “fails to address the health care cost crisis,” she said.

Second HHS Report Touting Benefits.

The report is the second issued by HHS lauding the benefits of PPACA as congressional Republicans push to repeal the law. On Jan. 18 the agency issued a report that also has been criticized as being misleading by implying that as many as 129 million people who have pre-existing conditions could lose their coverage if the law were repealed. The estimate included people who currently have health insurance through their employers and who are not likely to lose their coverage, critics said.

But Sebelius said the report shows that if the law is repealed, families and small business owners will pay the price in higher premiums. “We can't afford to go back to the days when uncontrollably rising costs put a bigger and bigger burden on family budgets and business balance sheets,” she said.

Nearly 75 million people will benefit from medical loss ratio regulations issued by HHS last November requiring insurers to spend at least 80 percent of premiums on medical claims or quality improvements, according to the report. In the small group market, 1 million enrollees could receive rebates averaging $312 per enrollee, while in the large group market, another 1 million enrollees could receive average rebates of $166 per enrollee, it said. Some 3 million Americans in individual market plans could receive rebates of approximately $164 per enrollee, it said.

Tax Credits Available.

Nearly 4 million small business owners have been notified that they may qualify for health insurance tax credits under the law, Sebelius said at the press briefing. Companies qualifying for the tax credits, which cover up to 35 percent of qualifying employers' insurance costs for up to six years, employ about 16.6 million workers, according to the HHS report.

“Some insurers are already saying that they're seeing applications jump after telling their small business customers about the opportunity,” Sebelius said. She cited Blue Cross Blue Shield of Kansas City, one of the insurers named in the report. The health insurer has used the tax credit as a marketing tool, increasing the number of small businesses buying its insurance by 58 percent--some 400 companies covering 9,000 employees, the report said.

The HHS report cites CBO estimates that about $6 billion of the small business tax credits will be provided in the 2010-2011 tax years, as well as CBO estimates that premiums in the small group market could be as much as 2 percent lower than they would be without the law.

Without PPACA, there would be a return to double-digit premium increases immediately because of fewer rate reviews and other factors, and in 2014 premiums in the individual market would be 20 percent higher for families and individuals, the HHS report said.

California Commissioner Pledges to Review Rates.

Speaking at the press briefing, California Insurance Commissioner Dave Jones applauded provisions in the law that help states strengthen their rate reviews. Jones said he is “very pleased” Aetna Inc., PacifiCare, and Anthem Blue Cross, which have filed rate increases in the state, have agreed to a 60-day delay while their rate increases are reviewed.

Jones said he would continue the fight he began as a legislator to get authority to reject health insurance rates determined to be excessive. California provides that authority for auto, property, and casualty insurance, he said.

By Sara Hansard

The HHS study is available in HealthDocs™.