Florida, Feds At Odds Over Cost Of Health Insurance On Federal Exchanges

Aug 9, 2013

State regulators say health plans sold on federal insurance exchanges could have premiums which cost up for 40 percent more than their existing counterparts. The estimates come after Florida forfeited its ability to set up a state-run exchange outlined in the Affordable Care Act. But just because insurance premiums are coming in higher doesn’t mean the people making those purchases through the exchanges will pay it.

Florida insurance officials have long warned of sticker shock when it comes to how much Floridians could pay for health insurance under the Affordable Care Act. At a recent meeting of a state health insurance board, state Insurance Commissioner Kevin McCarty pointed to a state report showing costs could rise.

“In Florida we had anecdotal [evidence]. Now we have real evidence that the rates are going up, said McCarty during the meeting.

Those numbers come from the Florida Office of Insurance Regulation. McCarty says Obamacare is to blame:

“That’s in large part being driven by the provision under the Affordable Care Act of guarantee issue: it means anybody, regardless of pre-existing condition, age or health status, are eligible for coverage under the Affordable Care Act.”   

Dr. Les Beitsch, a former Deputy at the Florida Department of Health and now a teacher at Florida State University’s Medical School, takes issue with how the numbers were calculated.

“Is it possible that 40 percent figure isn’t right? I think it’s probable that that number isn’t right. Because it isn’t compared to anything that’s out there right now," he said.

The Office of Insurance Regulation says it based its calculations on the minimum benefits health plans must carry to sell on federal exchanges, amended existing Florida plans to carry those same benefits and came out with an average increase of 35 percent. But Laura Goodhue, Executive Director of the consumer advocacy group Florida Chain, says that’s a bogus comparison:

“These are new insurance products. So if they’re saying costs are increasing, it’s hard to say [why], because you don’t really have an apples-to-apples comparison.”

And FSU’s Beitsch says the state has failed to take a few factors into consideration. “When you spread the product over a larger group, the idea behind insurance is that you’re spreading risk, and if you can do it well, it should drive the price down," he said.

The Affordable Care Act also comes with a few built-in safeguards to keep costs down. For one, insurance companies have a cap on the amount of money they can spend on administrative costs. Most of the dollars from premiums have to go to direct patient care. It’s called a Medical loss ratio, and if companies exceed it, consumers get rebate checks.

The dispute over how much insurance will cost on exchanges goes beyond Florida. States that support the Affordable Care Act and will run their own marketplaces, have forecast lower premiums. States like Florida which have left the insurance exchanges to the federal government, are reporting increases. Earlier in the year, the state ceded most of its authority to regulate insurance premiums to the federal government. But the federal government can’t regulate price.  It can, however, kick insurance plans off its exchanges.

Another factor is that many people who will buy insurance in the marketplace will qualify for subsidies – the lower your income, the higher your subsidy. In a conference call with reporters, U.S. Secretary of Health and Human Services Kathleen Sebelius pushed back against the states reporting large rate hikes:

“It’s unfortunate that in some instances, I think, erroneous information is being advanced as if these are the final rates in the marketplace and this is what consumers will be paying, and that’s just not accurate.”

But Florida officials -- Kevin McCarty included -- point out that just because insurance exchange estimates are coming in higher, that doesn’t mean the 700,000 Floridians eligible for the exchanges will pay those rates. The truth about rate increases lies somewhere between Florida’s position and the federal government’s.

“We’re going to see something that falls somewhere in between, and the expectation is that we should see an increase in cost because there’s a more comprehensive benefit. Is the consumer going to pay more? No they’re not, because they’re going to have much more access to subsidies than they’ve had before," said FSU's Dr. Les Beitsch.

Still, no one really knows. Secretary Sebelius says her department will release specific information by September first on what the costs will actually be. The exchanges will be open for business by the start of October, but registration is already underway.