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Individual health insurance claims costs likely to increase under ACA

Health Care and Health Insurance
by Tom Handley and David Dillon
Some consumers still struggle to understand health insurance
Some consumers still struggle to understand health insurance

Experts have long expected that there would be significant changes under the Affordable Care Act's reforms which fully go into effect on January 1, 2014. New estimates show just how costly some aspects of the law may be.

A study from the Society of Actuaries show that individual medical claims costs will likely rise nationwide at an average of 32 percent, with some states facing significantly higher jumps, according to Life Health Pro. This should be troubling to purchasers of health insurance plans, since claims costs are the largest driver of insurance premiums.

These higher claims costs were long expected, of course, because the ACA's guarantee issue reform requires that all Americans, even those with preexisting conditions, can now no longer be turned away. While the report did not take into account plans offered by employers, other estimates have shown these costs will likely rise, though it is difficult to say how much, according to the report. Though numerous states will experience massive increases in premium costs, others - including New York and Massachusetts - will see declines in the double-digits.

It is important to note that the study compared costs to the current individual market which uses underwriting and thus produces costs well below a typical "standard market".  Also, the greatest impact to the cost increase comes from employers who discontinue coverage.  It assumes that the employers dropping have very high cost employees (over 2x average).  It should also be noted that the study does not calculate the impact on the group insurance market as a result of these high cost employers dropping coverage.

Not all factors that would come into play regarding claims costs were taken into account, Kristi Bohn, one of the report's authors, told USA Today. She noted competition among insurers and subsidies were two elements not taken into account in the study, thus meaning the total impact of rising claims expenses nationwide isn't clearly known. Therefore, the reasonableness of the assumptions used in the study must be considered before drawing conclusions for a particular state.

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