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Study: Health overhaul to raise claims costs 32%

WASHINGTON -- Medical claims costs, the biggest driver of health insurance premiums, will jump an average 32 percent for Americans' individual policies under President Barack Obama's overhaul, according to a study by the nation's leading group of financial risk analysts.

The report could turn into a big headache for the Obama administration, with many parts of the country remaining skeptical about the Affordable Care Act. The estimates were released recently by the Society of Actuaries to its members.

While some states will see medical claims costs per person decline, the report concluded that the overwhelming majority will see double-digit increases in their individual health insurance markets, where people purchase coverage directly from insurers.

The disparities are striking. By 2017, the estimated increase would be 62 percent for California, about 80 percent for Ohio, more than 20 percent for Florida and 67 percent for Maryland. Much of the reason for the higher claims costs is that sicker people are expected to join the pool, the report said.

The report did not make similar estimates for employer plans, the mainstay for workers and their families. That's because the primary impact of Obama's law is on people who don't have coverage through their jobs.

The administration questions the design of the study, saying it focused only on one piece of the puzzle and ignored cost relief strategies in the law, such as tax credits to help people afford premiums, and special payments to insurers who attract an outsize share of the sick. The study also doesn't take into account the potential price-cutting effect of competition in new state insurance markets that will go live on Oct. 1, administration officials said.

At a White House briefing yesterday, Health and Human Services Secretary Kathleen Sebelius said some of what passes for health insurance today is so skimpy it can't be compared with the comprehensive coverage available under the law. "Some of these folks have very high catastrophic plans that don't pay for anything unless you get hit by a bus," she said. "They're really mortgage protection, not health insurance."

Rick Foster, a recently retired Medicare chief actuary, said the report does "a credible job" of estimating costs under the law, "without trying to tilt the answers in any particular direction." "Having said that, actuaries tend to be financially conservative, so the various assumptions might be more inclined to consider what might go wrong than to anticipate that everything will work beautifully."

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Another caveat: The Society of Actuaries contracted Optum, a subsidiary of UnitedHealth Group, to do the number-crunching that drives the report.

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