• WisBusiness

Friday, August 26, 2011

What does federal health care reform mean for Wisconsin?

By Dennis G. Smith
According to the latest nationally available data from the Kaiser Family Foundation, 90 percent of people in Wisconsin have health insurance coverage. Only three states are doing better than Wisconsin in covering their citizens. We achieved this high level of coverage without resorting to controversial government mandates to purchase coverage, like the one included in the Patient Protection and Affordable Care Act (PPACA). Until now, little attention has been directed to the impact of PPACA on health insurance markets in Wisconsin.

In June 2009, President Obama visited Green Bay and promised three things to those who already have health insurance—the rising rates of health care costs would decline, the cost of insurance would be lower, and everyone could keep the health plan they have. Now, two years later, the outlook is quite different.

The impact of PPACA on those with insurance will differ based on factors such as income, age, family size, and where you get coverage. Analysis shows that 87 percent of individuals in the individual market, will see premiums that will be 41 percent higher under PPACA. These changes described here represent only the effect of the law. The changes in premiums do not include medical inflation, which is projected to continue to increase faster than wages each year. The changes in premiums also do not reflect other changes such as reinsurance and risk adjustment which may mitigate some of the cost increases. Many individuals will qualify for new generous public subsidies to help pay for the cost of coverage. But even after these new subsidies are provided, 59 percent of the individual market will experience an average premium increase of 31 percent.

Young people will be hit harder with premium increases than older individuals. Looking only at age, the total cost of coverage for an individual age 19-29 in the current individual market would be $1,631 ($1,229 for premium plus $402 for out-of-pocket expenses). With the changes of PPACA, total costs will increase by 34 percent for such an individual. However, if you are in the 55-64 age group, your costs will be about the same. Total expenses without PPACA would be $5,860 compared to $5,829 with PPACA.

A family of four that does not qualify for a subsidy can expect to face an increase in total costs of 28 percent due to PPACA, rising from $8,528 to $10,912. For those who are covered by the small employer group market, the average premium increase will be 15 percent.

The new subsidies do not lower the cost of insurance, they only shift the cost of who is paying. More than 46 percent of individuals that will receive new public assistance either through the subsidies or Medicaid already had coverage, meaning that billions of dollars that are spent will not buy any new coverage.

The majority of people in Wisconsin get their health insurance coverage through their employer. Employer sponsored insurance provides 57 percent of the coverage in Wisconsin, compared to 49 percent nationally. Without PPACA, employer sponsored coverage would grow by 8 percent. Those covered by large employers (more than 50 employees) would expand by 300,000 and those covered by small employers would increase by 30,000. Individuals covered by public insurance (principally Medicaid) would fall by 50,000 due to improvements in the economy. People covered by the individual market would stay steady at 180,000 covered lives.

With PPACA, the existing individual market will be nearly wiped out, shrinking from 180,000 individuals to just 30,000. Another 130,000 individuals will be added to the Medicaid program and 90,000 individuals will depend on new federal assistance to pay the cost of their health insurance. Those covered by employer sponsored insurance will experience both gains and losses. More than 150,000 individuals will lose coverage through their employers, while nearly the same amount will gain coverage through their employers, with an overall net decline of 10,000 in employer coverage. The small group market will be especially volatile with 285,000 people moving among the different options. Only 60,000 people are expected to remain in their current small group coverage.

The implementation of PPACA will bring both opportunities and threats. If you work for a large company that provides health insurance coverage, the impact of PPACA should be modest. But it will be a wild ride for everyone else.

-- Smith is secretary of the Wisconsin Department of Health Services.


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