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January 16, 2013

Difficult battle ahead on health care

Health insurance premiums could soar in Georgia as more provisions of the federal Affordable Care Act come into effect this year.

Writing in the Wall Street Journal, actuary Mark E. Litow and Merrill Matthews, resident scholar at the Institute for Policy Innovation, predict that rates could climb 65 percent to 100 percent in states such as Georgia and Tennessee.

They aren’t alone in making that prediction. Mark Bertolini, CEO of Aetna, predicted last month that premiums could increase by 100 percent in some markets.

The increase will be driven by provisions in the law that make it more expensive for health insurance companies to do business, such as barring them from refusing to sell insurance to people with pre-existing illnesses or charging such customers higher premiums than those without such conditions.

Matthews and Litow say the increases will be largest in states that currently have the lowest rates, largely because states that have high rates have those high rates because they have already imposed expensive mandates on insurers.

They also predict that not all segments of the market will be affected equally. Large firms will be relatively unaffected. Small businesses will see their rates go up significantly, and those people who buy their insurance individually will be hardest hit.

The increases will also hit young people harder than older people.

A study by the Oliver Wyman consulting firm found people in their 20s can expect rate hikes  of around 45 percent, and those in their 30s could see their rates go up 31 percent.

That’s because the law bars insurance companies from charging older individuals more than three times what they charge the young. Currently, younger people generally pay less because they tend to be healthier and less costly to cover. In the future, they will essentially be subsidizing health insurance for the old.

It will be up to insurance companies, their customers and state lawmakers to find ways to mitigate these problems. They will face a difficult battle.

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