Filed Under:Markets, Employee Benefits

Actuaries: PPACA may have mixed effects on costs

"Your health insurance rate picture ... is ... blurry. Very blurry." (AP photo/New York City Opera, Carol Rosegg)

The American Academy of Actuaries is officially trying to lower expectations about just how confident forecasters can be when trying to predict how the Patient Protection and Affordable Care Act of 2010 (PPACA) will affect health insurance premiums.

The group emphasizes the difficulty of making premium rate predictions, both for individuals and for the population as a whole, in a new brief on the effect of PPACA on health insurance premiums.

PPACA is supposed to create exchanges, or Web-baed health insurance supermarkets; prohibit insurers' from considering health status when issuing coverage; sharply restrict insurers' ability to use most personal health information when setting rates; limit insurers to charging the oldest adult enrollees only three times as much as they charge the youngest adult enrollees; and add many new benefits standards, including bans on annual and lifetime benefits limits for "essential health benefits."

PPACA also is supposed to create a new premium assistance tax credit that may reduce the amount of cash moderate-income taxpayers have to pay for coverage.

"Importantly, premium changes will differ across states and individuals," according to Cori Uccello, an academy staffer who worked with the group's life practice council to develop the brief.

"In states that already limit the extent to which premiums can vary across individuals, especially those with guaranteed-issue requirements, average premiums potentially could decline as lower-cost individuals obtain coverage due to the individual mandate and premium subsidies," Ucello wrote. "In states with no or few rate restrictions, premiums are more likely to go up, to reflect an influx of higher-cost individuals."

Changes in premiums could also depend on the percentage of a state's people who already have health coverage when PPACA takes effect, residents' income, and other factors, Uccello said.

In states that have placed few restrictions on insurers' use of age in setting rates, "the compression of premiums due to the age rating restrictions will increase the relative rates for younger adults and reduce them for older adults," Uccello said.

Similarly, in states that have let insurers charge men and women different rates, a new PPACA ban on gender-priced pricing "will shift costs between men and women, depending on age," Ucello said. "In states that currently allow premiums to vary by gender, premiums are typically higher for younger women than younger men and for older men than younger women."

Some states could take action to reduce the effects of PPACA on rates for certain groups of consumers, Ucello said. 

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