No Insurance Rate Increase

No Rate Increase, Rand Predicts


Contradicting Florida's Office of Insurance Regulation, a study from the RAND Corporation reports that the Affordable Care Act is unlikely to cause a hike in premiums for the individual market in this state or nationally.

The RAND study findings stand in stark contrast to the widely publicized predictions of Florida Insurance Commissioner Kevin McCarty. On July 30, the Palm Beach Post published a prediction from McCarty that customers in the individual market would see rate increases of 30 to 40 percent for next year. Newspapers across the state picked up the refrain.

McCarty at the time said the premiums would shoot up because insurance carriers will no longer be able to screen out customers who have health risks. The forecast applied only to 5 percent or so of Floridians who bought their own policies, rather than getting them through their workplace or some other source.

But researchers from the well-known, non-partisan Rand Corp. found something quite different when they modeled what will likely happen in Florida, one of 10 states they focused on. 

In Florida and four other states, in an apples-to-apples comparison, "the law causes no change in premiums," the study summary concludes. Among the other states, premiums for the individual or "nongroup" market were forecast to rise in three and go down in two. 

RAND forecast that there would be little or no rise in premiums in the small group market in nine of the 10 states, including Florida. McCarty's staff predicted a hike of 5 to 20 percent in small-group premiums. 

"We conclude that the Affordable Care Act will lead to an increase in insurance coverage and higher enrollment in the nongroup market," the authors wrote. "Our analysis suggests that comparisons of average premiums with and without the Affordable Care Act may overstate the potential for premium increases."

McCarty's analysis, led by Deputy Commissioner Wences Troncoso, forecast an influx of sick people into the nongroup market that would force up costs and premiums. The Rand team predicts that will be offset by an influx of healthy young people, motivated by the law's requirement to get coverage and the subsidies available to those with modest incomes. 

In Florida, the federal online Marketplace will make tax credits available on a sliding scale to individuals and families with incomes between 100 and 400 percent of the federal poverty level. (Families USA has posted an income reference chart, and Kaiser Family Foundation provides a subsidy calculator.) The Marketplace is scheduled to be open Oct. 1 through March 31 for 2014 coverage.

The six researchers who performed the RAND analysis say they think the nongroup market in all 10 states will expand, growing from around 4.3 percent to about 9.5 percent. The small-group market, used mainly by businesses with fewer than 50 workers, will remain stable, they predicted.

They think that while some employers may drop coverage for workers, that will be offset by employers taking advantage of new "SHOP" exchanges. In the 33 states that are letting the federal government create and manage the exchanges, including Florida, the one for small businesses will be delayed for a year.

The study was commissioned by the U.S. Department of Health and Human Services. It was peer-reviewed.