The (Not So) Affordable Care Act

In health policy analysis, we view access, quality, and cost (that which the consumer feels) as the three main elements of health care. These three key components are sometimes referred to as the iron triangle because they are in conflict with one another.  Increasing quality of care usually means an increased cost, in turn decreasing access. Cheaper care probably means lower quality care that more people can afford, increasing access.  Most consumer price burden is felt through monthly premiums, which is why the insurer fees in the Affordable Care Act are so problematic.

This week Oliver Wyman published a study calculating the impact of fees imposed on insurers.  The results are enlightening, and similar to those found by both the CBO and JCT. One of many provisions in the President’s health care law is to impose fees, beginning in 2014, on health insurance providers offering fully insured coverage. From their analysis, Oliver Wyman concluded that these fees would, on average, increase premiums by 1.9% to 2.3% in 2014. The fees are set to gradually increase, making premiums increase by 2.8% to 3.7% by 2023.

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These insurer fees were created purely for government revenue, to help pay for the ACA’s massive expansion of entitlement programs.  Insurance companies, to stay competitive in the market, shift these fees onto the member’s monthly premium, which will greatly affect middle class Americans. In addition to increases in premiums through cost shifting, monthly premiums could potentially increase further due to adverse selection. When premiums increase, young healthy individuals are more likely to opt out, leaving an older, less healthy risk pool. This only increases premiums because the insurance company has to properly assess the risk of its population.