Premiums Rising 5-6% for Most Floridians
Florida's average increase in health-insurance premiums under the Affordable Care Act for 2014 will be in the range of just 5 to 6 percent, Office of Insurance Regulation officials said Tuesday.
That is not out of line with past years, and the new law will require health policies to cover more than many do now.
In the last few months, there have been predictions that Florida will see wild rate increases under the Affordable Care Act, as this article in the Wall Street Journal online in March forecast. But it turns out that only a small fraction of Floridians will see rate hikes in double digits, according to a presentation to Florida's Health Insurance Advisory Board on Tuesday by Wenceslao Troncoso, Florida's deputy commissioner for life and health insurance.
Premium increases of 30 to 40 percent on average will apply to policies in the individual market, he said, because insurers will now have to take all comers, rather than screen out those with health risks. (See the chart.
Only about 5 percent of the state's population -- 850,000 people -- are part of that market, OIR records show.
Small-group plans will see rate increases that average 5 to 20 percent, Troncoso said. But the majority of Floridians who have private insurance are in larger groups and will see a rate increase of about 5 to 6 percent, he said.
To put that in perspective, Florida's health insurance premiums rose an average of 10 percent a year between 2000 and 2009, according to a study by Families USA.
The Affordable Care Act requires that individuals buy health insurance on their own if they don't get it some other way, such as through the government or their employer. They will be able to use a federally run online Marketplace that will allow them to comparison-shop and will make tax subsidies available to many.
Troncoso said his forecast of the rate increase in the individual market represents an apples-to-applies comparison with the so-called "silver" plans that will be marketed on the exchange. Lower-cost bronze plans with high deductibles and higher-priced gold and platinum plans will also be available on the exchange.
He said there will be 11 companies competing for customers on the federally run online marketplace, which is to go into effect Oct. 1. Their names and rates are to be released on Wednesday, he said.
Troncoso said that there is a difference between the cost of premiums and the amount that a consumer will pay. The ACA includes tax subsidies that cut the price for those who earn up to 400 percent of the federal poverty level, or almost $46,000 for an individual (see chart).
Much of the hearing focused on the winners and losers based on age. The ACA requires a narrower rate band than Florida has had in the past; rates can vary by only a factor of three. So if a company charges $3,000 a year to a young, healthy customer, it can charge no more than $9,000 to an older, sicker one. And women will no longer be charged more than men under the ACA.
"Because of that (3 to 1) ratio, the youngest group gets creamed, right?" asked Health Insurance Advisory Board member Adam Clatsoff, owner of an insurance company in Coral Springs.
"The young and healthies are going to subsidize the older and the sick, yes," Troncoso said.
"But I think that's a big surprise for most of those young people," Clatsoff said. "I deal with them all the time; a lot of them think they're going to be getting free insurance, and lots of it. I think we have a communications problem, big time."
Insurance Commissioner Kevin McCarty agreed that there is "a lot of misconception I think that somehow that rates are going down under the Affordable Act. They may in some states actually be going down. We certainly haven't seen that in the rate filings in Florida. Maybe they are in some states, but (in Florida) now we have real evidence that rates are going up."
Clatsoff noted, "The age 50-plus market is going to do very well, which I'm very happy about because frankly I do business with those people and they're the people that have the money. But the big picture two or three or four years down the line, if we don't get the young kids in the plan nothing works, am I right or wrong?"
"The entire thing is predicated on the younger age group participating in the marketplace. That's the whole concept behind it," McCarty said.
The concern is that young Floridians will skip the purchase and pay the penalty for going bare. The first year, it's just $95 or 1 percent of income, whichever is greater. But each year the penalty goes up.
Board member Joan Galletta, a Jacksonville insurance agent, said she doesn't expect many young adults to sign up willingly with rates going up. She said, "We have difficulty getting them to buy insurance as it is."