Benemax

Consulting firm Oliver Wyman was recently contracted by Blue Cross Blue Shield to evaluate the impact on premiums of the Patient Protection and Affordable Care Act (PPACA), the Senate’s version of Health Care Reform legislation.

According to Oliver Wyman’s study, small group premiums will increase 20% by the 5th year of Health Care Reform. This 20% is IN ADDITION to “normal” annual increases due to so-called trend (medical inflation, increased utilzation, aging population, etc…)!

To estimate the real world impact of this change, just take a look at your current premiums for single and family coverage; now add $100/month to the single premium and $250/month to the family premium. How will you (or your business) afford that increase?

So not surprisingly, Oliver Wyman also concludes that fewer small employers will offier health benefit plans if reform legistlation passes in its current form. Almost 3 million members, now insured by small employers, would lose coverage over the next 5 years. That is in spite of the tax credits and other provisions designed to encourage employers to offer health benefits to their employees.

There are many provisions in PPACA that contribute to this projected cost increase: the inclusion of sicker people in the insurance pool, the potential for “adverse selection” (as young, healthy people opt to go without insurance…until they need it), increased taxes on insurance companies, drug companies and medical devise manufacturers, and mandated minimum benefits to name a few.

Let’s look just at this last item. The Senate bill requires all health insurance plans to have an actuarial value of 0.6 or higher. Today 32% of individuals and 9% of small employers have insurance plans with an acturarial value of less that 0.6. (This does not necessarily mean that these folks have inferior benefits; in many cases their insured benefits are supplemented by various self-funded, equity account arragnements.)

In addition, PPACA exhaustively defines what it considers to be “essential benefits” and mandates that those benefits be included in all insurance plans going forward. Many employer sponsored plans lack one or more of these “essential” provisions. The cost of including ALL federally defined “essential” benefits in ALL employer sponsored plans will alone raise the cost of those plans by more than 5%!

No doubt the goals of Health Care Reform are lofty: universal coverage, richer benefits, etc. But if these reforms make even basic insurance unaffordable…or if they soak up all our discretionay income so that our quality of life deteriorates sharply…who will have gained?