Tuesday, February 20, 2018
Opinion

Column: Health insurance will cost more — much more

Florida, buckle up. Over the next few months, you'll learn how much your health insurance premiums will go up for next year. The early evidence isn't good — the percentage increase could be in double digits.

But that's nothing compared to what you'll face in 2017. In May, I released a comprehensive study showing how the Affordable Care Act — otherwise known as Obamacare — will likely play out in Florida over the next few years. The diagnosis isn't good.

First, the short version. Unless Congress makes radical changes to the law, the ACA's structural problems will lead to substantial premium increases within two years. Once that happens, Floridians will likely leave the insurance market in droves. They'll have little choice — they won't be able to afford health insurance because federal subsidies won't keep up with the rapid price increases. Within a decade, this could swell the ranks of the state's uninsured by 45 percent.

This isn't baseless speculation. I reached this conclusion by using a peer-reviewed economic model published in several health journals. It was funded by both private and government sources, including the Department of Health and Human Services, and has been cited by multiple Supreme Court justices in ACA-related rulings.

But why won't this happen until 2017? Because that's the year when the Affordable Care Act goes into full effect, and certain temporary provisions begin to sunset. The changes will affect all plans sold for 2017 and beyond.

Two big changes will occur that year: Insurance companies will no longer have access to ACA's "reinsurance" and "risk corridor" programs. The first item currently allows insurers to bill the government for the most expensive patients; the second one guarantees that the industry's losses will be subsidized by you. When these two programs end, the insurance industry won't have access to taxpayer money.

That leaves Floridians to pick up the tab. Without taxpayer money, insurers in the state will increase plan premiums to cover the sudden shortfall. They'll have no other choice — the other option is to go out of business.

You might not have a choice, either. The data predict that the average 2017 premiums for a bronze family plan in Florida may jump from $6,240 to $12,663 — an increase of 103 percent. Undoubtedly, this will be far too expensive for many people. No insurance may be the only financially sound option. This will cause a chain reaction in the insurance market. As people leave the exchanges, insurers will have fewer customers who can shoulder health care costs. Thus, for 2018, they'll have to raise prices again — which will only cause more people to leave. This cycle could repeat itself indefinitely. Employer health care coverage won't stem the losses. After 2016, many businesses will stop offering health insurance because it's also getting too expensive for them. I estimate that over 900,000 people could lose employer coverage in Florida over the next decade.

This rapid turn of events leaves more Floridians who need health insurance from the exchanges. Those same exchanges, meanwhile, are hemorrhaging customers because they're becoming more expensive every year. Stuck in this cycle, many will find the IRS "shared responsibility fee" — the tax for not having health insurance — a far cheaper option. My analysis indicates that this could increase the number of uninsured by 45 percent to over 2.3 million people within a decade.

Think of what this means for the Affordable Care Act. Its architects promised that it would make health care cheaper while providing universal health care. Instead, it will make health care unaffordable for many while leaving more Floridians uninsured.

Now for the really bad news: I don't see a way out of this conundrum. The federal government could avert the crisis by continuing to subsidize insurance companies beyond 2017. Congress could also amend the law to increase federal subsidy rates once premiums skyrocket.

Yet neither option seems feasible. Not only are they politically dangerous, but they would increase the ACA's costs by tens, if not hundreds, of billions of dollars every year. Not even the Congressional Budget Office still thinks that President Barack Obama was right when he promised that this law would decrease the deficit — further cost increases would surely spell the law's doom. That leaves us with little to do but watch the Affordable Care Act unravel. I fear that this health care cure may be worse than the disease.

Stephen Parente is a professor of health finance, the associate dean of the Carlson School of Management and the director of the Medical Industry Leadership Institute at the University of Minnesota. He wrote this exclusively for the Tampa Bay Times.

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