Firms Weigh Costs Of Health Care

Here’s something that probably will astonish small business owners battered by years of steep health insurance premium increases: The majority of companies that provide health insurance to their employees have been getting a comparative bargain.

That’s according to a February report from the Centers for Medicare and Medicaid Services, or CMS.

About two-thirds – 65 percent, to be exact – of small companies that offered health insurance paid premiums that were lower than the average across all markets, CMS said.

That’s because some of their peers were being priced out of the market altogether, CMS said.

Medical underwriting allowed insurers to charge higher premiums based on a group’s health. Companies that couldn’t afford insurance didn’t buy it.

“As a result, most of (sic) people with coverage in the small group market have premium rates that are below average,” CMS said.

The downside is that employees of the other companies mostly had to fend for themselves in the individual market. There, too, insurers charged widely varying premiums based on health, or denied coverage based on pre-existing conditions.

The Affordable Care Act prohibits medical underwriting and denial of coverage. It puts everyone into the same risk pool based on just a few characteristics: age, location and tobacco use.

To ACA supporters, such changes make things fairer. To critics they are elements of an unsustainably costly, cumbersome and fatally flawed law.

The ACA – in full, the Patient Protection and Affordable Care Act, or PPACA – makes individual insurance affordable only through generous federal subsidies, they say. They point to rumors of steep premium hikes and to federal administrators earmarking billions of additional taxpayer dollars to aid insurers if they lose money.

According to the Government Accountability Office, the ACA’s sustainability remains an open question.

The law’s effect on the federal government’s long-term fiscal outlook “depends largely on whether elements in PPACA designed to control cost growth are sustained,” the agency wrote in January 2013.

If they are, the law actually could improve the federal deficit relative to baseline projections, the GAO said.

If cost control fails or is abandoned, deficits could grow worse, the agency said.

According to Gary Claxton, a health policy expert with the Kaiser Family Foundation, the law so far is rolling out “pretty much as one would anticipate.”

On balance, individual rates on the exchanges came in “meaningfully” lower than expected, he said. Further enrollment expansion should exert additional downward pressure on rates, he said.

One major ACA cost-control mechanism to keep an eye on is the accountable care organization, said Jim Schmucker, executive director of the Lancaster County Business Group on Health.

ACOs are regional consortiums of hospitals, doctors and other medical service providers; Lancaster General Health formed an ACO at the start of the year.

They are designed to coordinate care that now is fragmented, and to save money. If they hit wellness benchmarks while reducing costs billed to Medicare, Medicare will share those savings with them.

Broadly speaking, ACOs resemble HMOs, the insurer-created partnerships developed in the 1980s, Schmucker said.

Like ACOs, HMOs were designed to control costs. Consumers, however, objected strenuously when HMOs denied them care, he said.

This time, health care providers, not insurers, are in the driver’s seat, he said. It remains to be seen, however, if consumers again will perceive cost-control efforts as rationing care.

Source: Insurance News Net