Many Americans this week are finally getting to try on for size the Affordable Care Act. September 23 marks, just for starters, the end of lifetime payment caps as well as the expansion of parents' benefits to children under 26. Insurers can also no longer cancel coverage if a policyholder falls sick.
Yet, as the public and lawmakers continue to sift through the details of President Obama's health package passed last March, one questions lingers in most people's minds: What is this all going to cost? Not surprisingly, the answer isn't simple.
To start, important to keep in mind are the long-term savings. By 2019, the legislation is expected to reduce the nation's uninsured population by 32 million people, which should dramatically cut overall expenditures going forward. Consider, for one, that a study last year by the Center for American Progress Action Fund, a liberal think tank, concluded families pay, on average, as much as $1,100 extra each year in order to cover the cost of treatment to uninsured patients who cannot afford to pay their bills - that amounts to as much as 8 percent higher premiums.
Also expected to improve is the U.S.'s fiscal health. In March, the Congressional Budget Office projected the $940 billion package of reforms could reduce the deficit by $143 billion over the first 10 years, and by more than $1 trillion over the second decade.
Still, such gains are intangible right now for most people. Indeed, several polls this summer suggest that as many as four out of five Americans are concerned the healthcare overhaul will significantly raise their healthcare costs. Even more concrete, too, are the soaring health premiums most employees have seen in their paychecks this year.
Workers on average are paying nearly $4,000 in 2010 toward the cost of family health coverage, a 14 percent increase over last year, according to a September survey by the Kaiser Family Foundation. What's more, workers' contributions to premiums have gone up 47 percent since 2005, while premiums rose 27 percent and wages increased 18 percent.
With the economy struggling, businesses have been shifting more of the costs of health insurance to workers through premiums, deductibles and other cost-sharing, Kaiser President and CEO Drew Altman said in a statement. From a consumer perspective, the cost of health insurance just keeps going up faster than wages.
Another recent study by the National Business Group on Health (NBGH) found nearly two-thirds of employers planned to ask employees to contribute more toward their premiums in 2011. Insurers across the country have blamed new requirements under the health reforms for raising premiums by as much as nine percent.
Furthermore, several major carriers - including Cigna, WellPoint and CoventryOne - have already said they will end child-only health policies rather than extend coverage to children with pre-existing conditions, as the Affordable Healthcare Act stipulates as of September 23. How to insure all Americans was a very important issue we needed to solve, and this is a start down that path, said Helen Darling, NGBH's president. What is still worrisome is that there is nothing in the law that controls costs.
In reality, analysis by the U.S. Department of Health and Human Services (HHS) as well as independent groups estimates the added cost of healthcare reform will be no more than one to two percent. Insurers have been raising rates for a decade, so the idea health reform is to blame is a total canard, Ron Pollack, executive director of Families USA, which supports health reform, said. If anything, when the law is fully in place, price increases will be moderated, costs overall will be reduced and consumers will be better protected from outrageous premium hikes.
The Obama Administration has likewise warned insurers not to mislead policyholders about rising costs. I urge you to inform your members that there will be zero tolerance for this type of misinformation and unjustified rate increases, HHS Secretary Kathleen Sebelius wrote in a Sept. 9 letter to Karen Ignagni, president and CEO of America's Health Insurance Plans, the insurers' trade association.
It's a basic law of economics that additional benefits incur additional costs, and the impact on premiums depends on the type and amount of coverage policyholders had before, Ignagni responded the next day.
No doubt this back-and-forth will continue as the rest of the Affordable Healthcare Act's provisions come online between now and 2014. Part of the bill provides states $1 million to find ways to make the reasons behind rate increases more transparent. The measure as well as other reforms should bring more clarity to healthcare costs. That alone is a good thing, Darling argued.
With taxpayers carrying a bigger burden of rising costs, she said, it'll be a constant reminder we could - and should - be spending less.
Kathleen Kingsbury is a New York-based writer focusing on business, health and education topics. She is a contributing writer at Time, and she has lived and worked throughout Asia, most recently as Time's Hong Kong-based business correspondent. A recipient of Columbia Journalism School's Pulitzer Traveling Fellowship, she has also contributed to The Daily Beast, Fortune, Business Week, Life and CNN. The opinions expressed are her own.