The 156 million Americans who get their medical insurance through work have avoided the highly publicized headaches connected to the nation's new health care law -- so far.
But that doesn't mean the landmark law won't affect their premiums.
After years of relatively minor increases in premiums, rates are climbing again, and industry experts say a portion of the premium hikes can be blamed on the Affordable Care Act, widely known as Obamacare.
The reason is that beginning Jan. 1 the law will impose more fees on employers and insurers. And some or all of those new levies are being passed down to employees at their employers' discretion.
Peter Lee, executive director of Covered California, speaks at a news conference Monday in Los Angeles, Dec 2, 2013. California has opened an online insurance exchange for small businesses. (AP Photo/Nick Ut) ( Nick Ut )
Some companies are reporting health insurance policy increases of more than 10 percent, after years of minimal increases as the Great Recession -- and many health care economists say the 2010 law itself -- held down medical inflation. And the premium hikes are causing concern and confusion among workers.
"They don't tell us why the rates are going up," Rodney McLendon, a Sunnyvale tech consultant, said of the $100 monthly increase he and his wife will be paying next year for her Hewlett-Packard health plan.
Estimates of the premium increases that can be attributed to the new health care law vary.
The Menlo Park-based Kaiser Family Foundation says it's 2 or 3 percent for larger companies and 3 to 4 percent for smaller companies. And at least one major California health insurer expects the law to add about 4 percent to all employer premiums. The company asked not to be named for "competitive reasons."
"It's not very transparent how much any of the cost increases are related to any particular provision" of the health care law, said Bowen Garrett, a senior fellow at the Health Policy Center at the Urban Institute. "But my sense is that these pieces are rather small" compared with the total premium.
Larry Levitt, a senior vice president of the Kaiser Family Foundation, said the fee will hit smaller employers harder because they are more likely to buy insurance rather than be self-insured. "So they get affected by the tax on health insurers," he said.
Many large Bay Area companies have "self-funded" insurance plans in which the company acts as an insurer and assumes the risk of employees' health care costs.
The fees are clearly spelled out in the law:
- From 2014 through 2016, all employers must put $63 per insured employee per year into a fund that will be used to help pay the high costs of very sick people who enroll in the individual market through the new health insurance exchanges.
- From 2013 to 2019, all employers must pay a $2 per person annual fee to fund medical research.
- Starting in 2014, health insurance companies will have to pay an annual fee on premiums they collect. The tab for the entire industry starts at $8 billion and jumps to $14.3 billion by 2018, then will continue to be indexed to the growth in medical costs.
Experts say that cost will be divided among all insurers, with those that have the largest market share paying the most.
Congress reasoned that insurance companies could absorb the new fee, particularly since the health care law essentially caps their profits by forcing them to spend at least 80 percent of premiums on health care -- or rebate money to their customers. For 2012, some 8.5 million Americans got rebates totaling $504 million.
Despite the 2010 law, insurers are still making healthy profits. In 2012, the top 10 health insurers made $13.7 billion. And the outlook for these companies has improved under the law because they're expected to get millions of new customers when uninsured people sign up for health plans as required by the law.
All of this, health care experts say, should hold down prices on insurance plans over the long term.
In fact, the nonpartisan Congressional Budget Office estimates that by 2016, the change in average premiums in businesses with 50 or fewer employees because of the new law could range from an increase of 1 percent to a decrease of 2 percent. For large companies, the CBO said, the law would yield an average premium per person that could be as much as 3 percent lower.
In the next few years, there will almost certainly be substantial increases in medical inflation caused by such factors as the recovering economy, new medical technology and new prescription drugs. Many companies are also dealing with the costs of an aging workforce.
The upshot: All employers will be looking to push more of the cost of health insurance to their employees, from moving employees into high deductible plans that increase out-of-pocket costs for workers, to limiting coverage for dependents or spouses. But many health care experts say those are trends that would have happened with or without the new law.
To some Americans, the new fees are "a big deal because anything more spent on health insurance is too much," said Teny Maghakian Shapiro, an assistant professor of economics at Santa Clara University.
But to others, she said, "it's not a big deal because health insurance is important, and they're willing to pay for it."
"This will be a story about patience," she said, "because the payoff to citizens of having health care for everyone will benefit them down the line when costs start decreasing."
Contact Tracy Seipel at 408-920-5343. Follow her at Twitter.com/taseipel.
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