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By Robert Farley and Lori Robertson
President Barack Obama jumbled his facts when asked about "skyrocketing" premiums for people who get insurance through work. He was correct to say that, generally, the Affordable Care Act isn't to blame for "skyrocketing" employer-sponsored premiums, but he made two dubious claims to back up his argument:
■Obama said "people forget that the average premium was going up 15% a year before the Affordable Care Act," leaving the mistaken impression that he was talking about employer plans. That's true of premiums in the individual insurance market — for people who buy their own insurance — but not of rates in the large employer market, which was the context of the conversation.
■The president also went a bit too far in saying that the only impact on employer plans was a requirement to offer a minimum set of benefits. Employer plans do face other new requirements, some of which have had a small impact on premiums.
Obama's comments came during a live Web Q & A hosted by WebMD on March 14. While much of the debate over the Affordable Care Act to date has centered around the individual market (which affects about 5% of Americans) and the marketplace exchanges, one of the questions came from a man concerned about the Affordable Care Act's impact on employer-sponsored plans (which affects HYPERLINK "http://kff.org/other/state-indicator/total-population/"48% of Americans).
The WebMD interviewer, Lisa Zamosky, said that many people felt the ACA was causing their employer plans to increase in price. She said "Dan from Nevada," who works for a "large corporation," wrote that his "insurance costs have skyrocketed" since the law was passed. She asked if Dan was correct to blame the increase on the ACA.
Obama, March 14: No, he's not. A lot of people have looked at this and there's nothing in the Affordable Care Act that would impact an employer-sponsored plan, other than making sure that the employer-sponsored plan is actually providing a certain basic level of coverage.
Now, I don't know the particulars of his employer's plan, but what people forget is that the average premium was going up 15% a year before the Affordable Care Act. Health care costs overall are actually going up more slowly over the last three years than in the last 50. And that's true in the private insurance sector. It's also true for Medicare and Medicaid. So what we actually know is, premiums are going up more slowly, not more quickly, than they were before this law was passed.
That doesn't mean that somebody might not still be frustrated when they see their particular plan or their costs going up. And what a lot of employers have been doing for quite some time is offloading more and more cost onto their employees in the form of higher deductibles and higher co-pays. …
The fact of the matter is most private employers, their plans are unchanged. They're making decisions based on their own business decisions. They're not mandated to increase premiums for their employees.
PREMIUMS BEFORE THE ACA
We'll start with Obama's claim that "the average premium was going up 15% a year before the Affordable Care Act."
Coming as it did in the middle of Obama's answer to a question about the law's effect on employer-sponsored plans, listeners could be forgiven for assuming the president was talking about premiums of employer-sponsored plans.
Family premiums in the employer-based market increased about 4.8% per year on average in the five years prior to passage of the Affordable Care Act in March 2010, according to the non-partisan Kaiser Family Foundation. Since the ACA passed, the annual increases have been 9.4% in 2011, 4.4% in 2012 and 3.8% in 2013. That's an average of 5.9%.
In fact, going all the way back to 2000, the increase in average annual family premiums never reached the 15% Obama cited, though it got nearly that high in 2002.
The White House press office says, however, that Obama was referring to annual increases in the individual market prior to the ACA. And it's true that the annual premium increase in the year before the ACA was 15%, according to the Kaiser Family Foundation. In 2010, the last year KFF surveyed people in the non-group or individual market regarding premiums, it found that people who bought their own insurance reported that "their insurers most recently requested premium increases averaging 20 percent."
The White House argued that since the marketplace exchanges are for people who don't get coverage through work, it was valid for Obama to cite increases in premiums in the past in the individual market when talking about the impact on health care costs.
It's a figure that Obama has cited in the past.
Obama, Nov. 14, 2013 : We know that on average over the last decade, each year, premiums in that individual market would go up an average of 15% a year.
Obama, Oct. 30, 2013 : Before the Affordable Care Act, the worst of these plans routinely dropped thousands of Americans every single year. And on average, premiums for folks who stayed in their plans for more than a year shot up about 15% a year.
But in those cases, Obama was talking about the individual market, and he clearly noted that he was. In the WebMD interview, the question had nothing to do with the individual market. It was about the law's impact on employer-sponsored plans. Obama never signaled that he was switching his response to the individual market.
Moreover, in the next sentence, Obama went on to claim that "health care costs overall are actually going up more slowly over the last three years than in the last 50." The White House directed us to data showing that per capita health care spending (see paragraph three) and health care expenditures, in general, are at historically low levels. And as we noted recently, the per capita cost of health care has dropped in recent years to the lowest three-year average in 50 years. Experts say the struggling economy is the main reason for the slowdown in health care spending, but some experts credit the ACA for part of the slowdown as well.
The president was answering a question about the law's impact on employer-sponsored premiums, but his response gave the false impression that those premiums had been rising by 15% before the law. Those premiums haven't been anywhere near such an annual increase since 2002. Instead, he was referring, without saying it, to the individual market, which is undergoing significant changes under the law.
REQUIREMENTS FOR EMPLOYER PLANS
In fact, employer-sponsored premiums have gone up, on average, because of the ACA, though only by a small amount. Obama was correct to say that generally the law isn't to blame for any "skyrocketing" employer-sponsored premiums. But he went a bit too far in saying that the only impact on employer plans was a requirement to offer a minimum set of benefits. The plans have faced more requirements than that.
Again, Obama was asked if "Dan from Nevada," who works for a "large corporation" and says his "insurance costs have skyrocketed," was correct to blame that increase on the ACA.
Obama: No, he's not. A lot of people have looked at this and there's nothing in the Affordable Care Act that would impact an employer sponsored plan, other than making sure the employer-sponsored plan is providing a certain basic level of coverage.
We don't know the specifics of Dan's situation — and neither did the president — but there's no evidence that the ACA has caused premiums for large employer plans to skyrocket. And it's true that the Affordable Care Act mainly affects the individual market, and, to a lesser extent, the small-group market. Large employers don't face major, radical changes.
But they do face new requirements, some of which have had a small impact on premiums.
The law requires large employer plans to:
■ Eliminate annual and lifetime caps on essential coverage
■Provide coverage for dependents up to age 26
■Spend 85% of premiums on medical costs
■Eliminate coverage exclusions for preexisting conditions
■Cover preventive benefits without cost sharing
■Have an external appeals process for policyholders with denied claims
Small-group plans (at companies with up to 50 workers, and up to 100 workers in 2016) face additional requirements that large employers don't: They have to cover the law's essential health benefits; they can't rate polices based on health status or gender; and they face a state or federal review if premiums increase more than 10%. That's all for non-grandfathered plans, which are the policies held by most workers. (Grandfathered plans only have to meet the first four conditions listed above. For more on grandfathered status, see our Jan. 3 article, "Workers 'Losing' Employer Plans?")
Several of the requirements for employer insurance were implemented early on. Many experts estimated that from 2010 to 2011, employer premiums went up 1% to 3%, on average, as plans had to allow adult children to stay on parents' policies until age 26, cover preventive care without cost sharing, increase annual coverage limits and cover children regardless of preexisting conditions.
The average family employer-sponsored premium jumped up by 9% that year, leading Republicans to claim that the ACA had caused the increase. But independent experts told us that the bulk of the change was due to rising medical costs, as usual. Drew Altman, CEO and president of the Kaiser Family Foundation, wrote at the time: "The two biggest changes this year allow young adults up to age 26 to stay on their parents' insurance policies and require some insurance plans to cover preventive services at no cost to patients. These are popular provisions that provide real benefits, and combined they account for about one to two percentage points of this year's premium increase."
Since 2011, premiums have risen at historically low rates. The next major change for some employer plans is the requirement to provide coverage for full-time employees. The Obama administration delayed that provision until 2015. Nearly all large companies with 200 or more workers offer insurance already — 99% of them, according to KFF's 2013 employer survey — though the firms may not offer it to all employees. Fifty-seven percent of smaller firms, with three to 199 workers, offer insurance.
Most Americans get their insurance through work, and the nonpartisan Congressional Budget Office estimates that that won't change. It estimates that 158 million Americans will get insurance through their employer in 2018, 7 million fewer than if the law hadn't passed. That's a net decrease, which is a combination of some workers gaining coverage, some losing an offer of coverage and others choosing to not take the employer's offer.
Source USA Today
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