By John Reichard, CQ HealthBeat Editor
June 7, 2013 -- Marking the opening round of what's likely to be steel-cage political combat over the impact of the health care law on insurance rates, President Barack Obama said last week in a speech in California that the overhaul is ushering in a new era of vigorous competition among plans in the state and elsewhere, resulting in reliable, affordable coverage.
Appearing in San Jose with local government, media, and philanthropic officials, Obama touted the state's new insurance exchange as a model.
"If you're one of nearly 6 million Californians or tens of millions of Americans who don't currently have health insurance, you'll soon be able to buy quality, affordable care just like everybody else," Obama said. Thanks to new online insurance marketplaces opening in the fall, health plans will actually have to compete, he said, "and that means new choices."
While in many states Americans now only have a choice of one or two plans, based on early reports about 9 in ten Americans expected to enroll in the new marketplaces live in states where they'll be able to choose between five or more different insurers, he said.
Contrary to "doom and gloom" forecasts, Obama said that in states that are properly implementing the overhaul, "competition and choice are pushing down costs in the individual market just like the law was designed to do." Premiums in California's exchange "were lower than anybody expected," he said. And about 2.6 million Californians, nearly half of whom are Latinos, "will qualify for tax credits that will in some cases lower their premiums a significant amount."
Republicans Starting to Push Back
Health law supporters say Obama's salesmanship is long overdue and sorely needed if the administration is to meet its goal next year of enrolling 7 million uninsured people in the new insurance exchanges. While Obama's appearance was good news for them, Republicans are gearing up to make counter claims. The right-leaning American Action Forum issued a statement last week saying coverage on the California exchange will limit enrollees' choice of providers. "What you will not hear from [Obama] is that if you live in California you could be losing 64 percent of your provider network," said Forum spokeswoman Emily Egan.
And in Ohio, Lieutenant Gov. Mary Taylor, a Republican, said the state insurance department's initial analysis shows "consumers will have fewer choices and pay much higher premiums" for plans to be offered by the federal exchange serving the state. Monthly premiums in the individual market now average $223, Taylor said, citing an estimate by the Society of Actuaries. But proposed rates show that average climbing 88 percent to $420, she added in a recent news release.
Late last week, five Senate Health, Education, Labor and Pensions Committee Republicans wrote to Health and Human Services Secretary Kathleen Sebelius asking her to follow up on a May 9 Associated Press story saying that a California law gave the state's exchange the power to keep secret certain spending details for the contractors that will perform most of the marketplace's functions.
The White House made clear in focusing on California that coverage of the uninsured Latino population is going to be a key part of making the health care law a success—not only in California, but nationally. Not only will that score the administration political points with a pivotal voting bloc in the 2012 elections, it could sharply reduce the number of Americans without coverage.
California has a big chunk of the nation's uninsured population, and nearly two-thirds of it are Latino, says the California Endowment, a health care philanthropy.
White House officials said in a background briefing that California provides a good model for the success of enrollment efforts going forward, Three powerful Spanish-language media companies have agreed to be part of the California outreach effort, officials noted, and will hit nearly 100 percent of the target Hispanic communities in the state, they added.
The three—Univision, Telemundo, and impreMedia—are beginning a three-phase campaign that could be copied in other states, officials said. The opening "awareness" phase will tell people what the health law (Pl 111-148, PL 111-152) does and that the enrollment period is fast approaching. The next is the "education" phase—which will start closer to the fall. That will let people know where to get more information and to find out what their coverage options are. The third phase is the actual enrollment period that will run from Oct. 1 through March.
Particularly critical to the success of the law is enrolling young and healthy people whose relatively low health costs would make it possible to keep premiums affordable for older, sicker Americans. Of the target population of 7 million covered in exchanges next year, administration officials say it's important that 2.6 million or 2.7 million are young and healthy. When you drill down and think about who these folks are, about one in three live in California, Florida and Texas, one official said.
Obama emphasized the importance of people stepping forward and signing up for coverage. But the key to that will be whether rates in exchanges across the country are affordable—or perhaps more importantly, are viewed as affordable.
Politics and Rates
States with Democratic governors are more likely to cast exchange rates in a favorable light and those run by Republican governors in a negative light. Kaiser Family Foundation Senior Vice President Larry Leavitt said in an interview that his review of the Ohio rates shows that they are actually about the same as those in California. In California, officials helped to create a favorable impression of the rates in the individual insurance market next year by noting they would be about the same or lower as the rates in 2013 for small employer plans. Individual rates would range from 2 percent above to 29 percent below the 2013 average premium for small employer plans, officials said.
Comparing premiums to those in the small group market is "a way of testing the reasonableness" of individual plan premiums, Leavitt said. That's because the benefits individual plans must provide next year will be comparable to those that exist in the small group market, he said. Had insurers come in with 2014 rates for the individual market that were sharply higher than those in the small group market, it would have been a sign of insurer price gouging under the health law, something he said supporters of the measure feared insurers would do after the law took effect.
In Ohio, officials instead chose to focus on year-to-year comparisons of individual plans. The 2013 rates they used to calculate the 88 percent increase were based on much skimpier coverage than the plans will have next year, analysts said. Kaiser analyst Karen Pollitz said that in some instances, plans now sold on Ohio's individual market barely qualify as health insurance and someone buying such policies risk bankruptcy if serious illness strikes. But individual coverage next year in Ohio will be more comprehensive and "heavily subsidized for 80 to 90 percent of newly insured Ohioans," she said.
The rates cited by Ohio officials are proposed and could be lower following rate review in the state.
California officials had only limited data comparing individual plan premiums in 2013 versus 2014. Blue Shield of California suggested enrollees in its individual plan would be paying 13 percent more next year.