CMS Actuary Report

Basis of Report: Premium estimate is based on ACA provisions requiring guaranteed issue, guaranteed renewability and community ratings.

Comments: House Speaker John Boehner (R-Ohio) and House Small Business Committee Chairman Sam Graves (R-Mo.) say the report shows that two-thirds of Americans who work for small businesses will see premium increases.

Feb. 24 (BNA) -- Premiums for roughly 11 million people will increase, while those for about 6 million will decline because of provisions in the Affordable Care Act requiring health insurers to cover everyone with limited rate variations, according to a Feb. 21 report by the Office of the Actuary for the Centers for Medicare & Medicaid Services.

The Affordable Care Act requires all nongrandfathered health insurance coverage in the individual and group markets—plans issued after the law was signed March 23, 2010—to be guaranteed issue and guaranteed renewable, the actuary's report said. All nongrandfathered insurance plans in the individual and group markets can vary premium rates based only on age, family status, geography, and tobacco use, and the variation in the age and tobacco use factors is limited, it said. “This new premium rating requirement will impact the premiums paid by individuals and families working for small employers who offer health insurance,” it said.

The “Report to Congress on the impact on premiums for individuals and families with employer-sponsored health insurance from the guaranteed issue, guaranteed renewal, and fair health insurance premiums provisions of the Affordable Care Act” was released Feb. 24 by House Speaker John Boehner (R-Ohio) and House Small Business Committee Chairman Sam Graves (R-Mo.). The actuary's office is nonpartisan, Boehner said in a release.

“For all the promises of lower costs for small businesses, the administration now admits that far more of these workers will pay higher than lower premiums under the law,” Boehner said. “Two-thirds of small business employers face higher premiums as well, which is one of the reasons so many are struggling to create jobs under the president's law,” he said.

About 17 million people have been enrolled in fully insured small group health insurance through employers with 50 or fewer employees who will be affected by the new premium rating requirements in the ACA, the CMS actuary report said. Firms with employees who had better than average health risks would typically pay lower premiums and were more likely to be the firms that offer health insurance, it said.

About 65 percent of small employers offering health insurance coverage have premium rates that are below average, the report said. Once the new premium rating requirements go into effect small employers that offer coverage to their employees and their families would have average premium rates, it said. “Therefore we are estimating that 65 percent of the small firms are expected to experience increases in their premium rates while the remaining 35 percent are anticipated to have rate reductions,” it said.

Report Two Years Late

Boehner said the report was required at his request as part of the 2011 Budget Control Act, and it was due 90 days after enactment of that law. “The report, two years late, was published by the Obama administration late on Friday, February 21, 2014, with no public announcement,” he said. “It's clear why the Administration sought to delay and deemphasize the release of this report. It undermines the central promise of the president's health care law: affordable coverage. And the only reason this information has come to light is the hard oversight work of House Republicans,” he said.

“The Obama administration's long delay of this CMS report is consistent with the rest of the law—behind schedule and bad news for small business,” Graves said in a release. “The fact that two-thirds of Americans who work at small businesses will see premium increases because of the health law is devastating news. This is one more in a long line of broken promises from President Obama and Washington Democrats.”

Graves also said that a report by the nonpartisan Congressional Budget Office released earlier in February “provided economic data that echoed what many small businesses have been telling us—that the health law is killing jobs and harming the economy.” The CBO report said the number of hours worked because of the effects of the ACA will reduce the number of full-time-equivalent workers by about 2 million in 2017, rising to about 2.5 million in 2024 (24 DER A-15, 2/5/14).

Factors Not Considered in Estimate

In addition to premium impacts from guaranteed issue, guaranteed renewability and premium rating provisions, other factors in the ACA affecting rates include changes in product design, provider networks or competition, which weren't considered, the report said.

“In addition, other provisions of the ACA, including the coverage expansions, the extension of dependent coverage to age 26, the individual mandate, and the employer mandate will impact the availability of coverage, the take-up of that coverage, and the premium rates charged to those who currently have employer-sponsored insurance, but those impacts are not included in this estimate,” the report said. The actuary's office did a more complete report on the financial impacts of the ACA in 2010, it said.

The Department of Health and Human Services didn't respond to Bloomberg BNA's request for comment on the CMS actuary's report.

“The study just looked at: no preexisting condition exclusion, premium rating reforms, and guaranteed issuance, and found significant increases in premiums,” William Schiffbauer, a health-care attorney, told Bloomberg BNA in an e-mail.

“The legislation that directed the study did not factor in all of the other reforms including requiring individual and small group coverage to include the essential health benefits, no lifetime or annual limits, the MLR [medical loss ratio] rebate, and all of the new Exchange fees, fees for effectiveness research, and industry sector fees,” Schiffbauer said. Some of those provisions could add more pressure on premiums, he said.

To contact the reporter on this story: Sara Hansard in Washington at shansard@bna.com

To contact the editor responsible for this story: Janey Cohen at jcohen@bna.com