Actuaries: Health Costs to Go Up No Matter What Court Decides on Law

June 20, 2012

As the country awaits the highly anticipated ruling by the U.S. Supreme Court to uphold or overturn the Patient Protection and Affordable Care Act (ACA), the actuarial experts who price are warning that health insurance costs will likely continue to increase regardless of how the court rules.

A Society of Actuaries (SOA) member survey of 160 actuaries conducted June 13 found approximately two-thirds of respondents expect annual costs for currently insurable individuals to increase at least 10 percent, and costs for large group employers to increase at least five percent, even if the ACA is upheld in its entirety.

If the individual mandate is struck down, but all other provisions remain, 76 percent of actuaries surveyed expect annual health costs for currently insurable patients to increase more than 10 percent. Only three percent of respondents expect costs to go down if the individual mandate is thrown out and all other provisions remain.

“You have to get every risk in the pool – the healthy risks and the less healthy risks – to keep insurance affordable. Without the individual mandate that will be very difficult to do,” said Susan Pantely, principal and consulting actuary with Milliman, Inc., and member of the SOA.

However, Pantely thinks that the current individual mandate is weak, since many people will choose to pay the penalty until they need insurance.

The survey found that eight in 10 actuaries (83 percent) expect the ACA to reduce the number of uninsured by at least 10 million (from approximately 50 million currently uninsured). More than one-third (37 percent) of respondents believe the ACA will reduce the number of uninsured by up to 30 million, potentially leaving 20 million still uninsured.

“I agree with my colleagues that the ACA will increase coverage, but none of us believe that it will cover the whole 50 million and that’s where there is a gap,” Pantely said. “A large portion of this expansion is through Medicaid, and right now many uninsured people are already eligible for Medicaid but just haven’t enrolled. There have been many attempts to get these individuals signed up for the program.”

There are ways to minimize the number of uninsured without the ACA, Pantely said. For example, she noted that people can already shop for insurance rates through brokers and websites, even though these methods may not be as sophisticated as federal and state-run health insurance exchanges.

Sixty percent of survey respondents believe exchanges will not reduce individual and small group insurance costs compared to pre-exchange private-market options.

Ian Duncan, professor of actuarial statistics at University of California, Santa Barbara and SOA member, said that even if the Supreme Court upholds the law, significant changes are likely to occur. “It’s becoming clear this is going to cost way more than expected and implementation will be more difficult and time consuming in terms of the rollout timing,” Duncan said. “It’s virtually impossible to do all states by 2014.,” Duncan said.

“One of the flaws of the ACA was to fit everything at the same time,” Duncan said. “Health care reform has always proceeded as a series of small steps. If [the ACA is] repealed, experiments like accountable care organizations (ACOs), bundled payments, consumer driven health and improved analytics, will continue. But, it will be up to the states to decide which aspects are worth continuing.

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