Why Health Insurance Premiums May Rise Next Year

Jul 9, 2018
Originally published on July 9, 2018 8:34 pm
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ARI SHAPIRO, HOST:

Health insurance premiums may be going up after the Trump administration announced it will temporarily suspend a key part of the Affordable Care Act. The Department of Health and Human Services said over the weekend it would stop the law's risk adjustment program. That's a program that's mostly behind the scenes and is designed to stabilize the insurance markets. The agency says it's responding to a court order. Joining us now to explain what risk adjustment is and what is likely to happen to premiums now, NPR health policy correspondent Alison Kodjak is here in the studio. Hi, Alison.

ALISON KODJAK, BYLINE: Hey, Ari. How are you?

SHAPIRO: Let's start with the basics. What is the risk adjustment program?

KODJAK: So it's basically a system of payments between insurance companies that's mediated by the Department of Health and Human Services. Companies that have a lot of healthy customers and don't have to spend a lot of money actually on healthcare make payments. They put money in. And the companies that have sicker customers that do spend a lot get money back. It's a way to sort of even out the system. And the idea is to make sure that nobody has an incentive to keep away from sicker customers.

SHAPIRO: Now, the Department of Health and Human Services says it is suspending these payments because of a court order. Explain what's going on here.

KODJAK: Yeah. It's a little bit confusing because the court ruling was back in February. There's an order in - out of New Mexico that said the formula for making the payments was unfair. But there's a second court order in Massachusetts that held the opposite. So HHS seems to have chosen which side to take. They chose the New Mexico ruling, which isn't all that surprising because the Trump administration up until now - and even Republicans before Trump became president - have been trying to kill the Affordable Care Act for quite a (laughter) long time.

SHAPIRO: Right. Yeah.

KODJAK: So you know, it sort of follows a pattern. Last summer, there was all those repeal the Affordable Care Act and replace it. And before that, they even killed another one of these stabilization programs, called the risk-corridor program. I talked this morning with Marc Harrison. He's the CEO of Intermountain Healthcare in Utah. And he says all of this makes it really hard for them to do business.

MARC HARRISON: Historically, it was absolutely inconceivable that the government wouldn't follow through on paying its debts. But the risk-corridor payment's probably the first example folks have had of the government not following through.

KODJAK: And he says, from that program, the government owes his company about $400 million.

SHAPIRO: So maybe not following through on the promise to pay debts, but following through on the promise to gut the Affordable (laughter) Care Act in any way they can.

KODJAK: (Laughter) Exactly.

SHAPIRO: If HHS says it's not going to make the payments this fall for 2017, why would this possibly affect premiums for next year?

KODJAK: Well, the problem is what companies call uncertainty. They don't know what's going to happen. They don't know whether the administration next year's going to make new rules or get rid of other rules. And so they get defensive, and they start to raise prices just to protect their profits, make sure they don't lose money.

SHAPIRO: So who's actually going to see prices go up? How much, and what kind of an effect are we talking about?

KODJAK: Well, it's - what's going to happen to customers varies a little. Most people are protected by the government subsidies because they don't - so they won't see their out-of-pocket go up. But there are a lot of people still in small businesses who don't qualify for those subsidies. And they're going to see their prices rise if this doesn't get resolved soon. Here's what Marc Harrison told me.

HARRISON: I would really encourage our regulators and our legislators to go and see what it's like in a clinic. Go and see what it's like at a hospital, and try and reconnect their actions back to the lives of regular people who are trying to get healthcare.

KODJAK: So he says that they seem to be working on, you know, accounting and technicalities and not really paying attention to the patients. And he'd like to see more of that.

SHAPIRO: NPR's Alison Kodjak. Thanks, Alison.

KODJAK: Thanks, Ari.

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