First off let me apologize. We put the blog on hold following the Holidays as we dedicated much of our time to catching up and and conducting a review of our internal processes. Just like exercising, it’s harder to start-up again than it is to maintain. So here we go with our first post of 2012.
Impact of ACA
With the passage of the Affordable Care Act (ACA), we were told that competition would increase which would, in turn, lead to lowered rates and more options. Well, two years later, the results don’t follow the promise. However, with ACA’s passage, we have seen some noticeable changes:
- We see a concentration of Health plans across the country. In general, fewer plans leads to less competition, which usually leads to higher rates.
- Premiums haven’t gone down. In fact, they’ve gone up in every state except one. The increase in rates isn’t a minor jump either. The average increase for the 37 states that make this data available is 20%, with a high of 68% in Washington and a low of 5% in Massachusetts. One state, Utah, had the only decrease of all 37 states coming in at a 17% decrease.
How Prior Approval Relates to Premiums
The most interesting aspect of the premium increases is how it relates to the “Prior Approval” portion of ACA. Through a federal subsidy, states were encouraged to give their Insurance Commissioners the ability to review and approve, or deny, any rate increases from Health Plans.
Prior to the ACA passage, 43 states already had some measure of reviewing rate increases and 3 states required nothing at all. Of the 37 that provide data, 16 states had the “file and use” review which basically means that the increases have to be submitted to the Commissioner of their state, but they cannot turn them down. 18 states do have a Prior Approval process in place, but even that did little to nothing to stem the increases since the passage.
Here are some stats about the approval process and the states:
- Of the 18 states that require Prior approval, the average increase was 20% with a high of 68% in the state of Washington.
- Of the 16 states that institute the “file and use” method, the average increase was 21% with a high of 50% in the state of Tennessee to a low of -17% in Utah.
- 3 of the 37 states that make data available do not require any approval. These states averaged a 16% increase with a high of 22% in Georgia.
Bottom Line
So for now, the ACA does not support the premise that it will provide for more competition thereby reducing rates. The popular provision of requiring Prior Approval has also proved to be meaningless as the states that do not require any approval have a lower on average increase and the state that has the highest increase, Washington at 68%, is a prior approval state.
Only time will tell if the provisions of the Act will continue to result in these increases or will they change and go down. But, given the cost of healthcare continues to rise it is probably a safe bet that it will not go down.
