Filed Under:Markets, Employee Benefits

Consultants: PPACA not one big happy luau

Enrolling more people her could cut individual rates in Hawaii by $12. (AP photo/Ronen Zilberman)
Enrolling more people her could cut individual rates in Hawaii by $12. (AP photo/Ronen Zilberman)

Letting sick residents of Hawaii buy individual health coverage for the same price as healthy people may help the sick people but add about 50 percent to the average cost of individual coverage.

Consultants at Oliver Wyman, a unit of the Marsh & McLennan Companies, give that estimate in a report on the effects of the Patient Protection and Affordable Care Act (PPACA) in Hawaii.

The Hawaii Insurance Division, an agency in a state that supports PPACA and is setting up a state-based public exchange, commissioned the report.

PPACA is set to forbid individual health insurers from considering health status when deciding whether to issue individual health coverage. The law will also prohibit individual health insurers from considering health status factors other than age when setting individual coverage prices, and they will limit the insurers' ability to charge the oldest adult insureds more than the youngest insureds.

The Oliver Wyman consultants expect individual premiums to average $346 in Hawaii in 2014, up from an average of $231 today.

The effect of letting more people with health problems enter the individual health insurance risk pool on morbidity will be enough to account for all $115 of the increase in average individual premiums between 2013 and 2014, the consultants write in their report.

Also in the report, the consultants estimate that PPACA could have the following additional effects on the average Hawaii individual health premium:

  • A 7 percent increase in the underlying cost of medical care could increase the average by $72.
  • Temporary PPACA risk-management programs could cut the average by $40.
  • A PPACA provision that will require individual and small-group plans to cover an "essential health benefits" package could increase the average by $27.
  • New taxes could increase the average by $17.
  • Efforts to persuade more young, healthy people to buy coverage could cut the average by $12. 

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