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June 16, 2013

Healthcare Exchange Watch: Ohio's Phony Tale About Rising Premiums

By Trudy Lieberman

Officials in Ohio are warning Buckeye State consumers that "insurers expect the cost to cover healthcare expenses for consumers will significantly increase." Never mind that their predictions are based on what insurers have told them their "costs" will be--not on the actual premiums they plan to charge.


Re-posted with permission of Columbia Journalism Review where this article originally appeared on June 14, 2013

First came the good news from the West Coast about how Obamacare will be lowering premiums for individuals shopping in the new state exchanges. Never mind that in California the official folks at the exchange, who are supporters of health reform, mixed apples and oranges to reach their conclusion that rate shock had not materialized. Now come the official folks in Ohio, who, by the way, are not big Obamacare supporters, warning Buckeye State consumers that "insurers expect the cost to cover healthcare expenses for consumers will significantly increase." Never mind that their predictions are based on what insurers have told them their "costs" will be--not on the actual premiums they plan to charge.

The Ohio Department of Insurance explained its thinking in a press release :

While those costs do not specifically track with the premiums insurers charge individual customers, it is expected that these increases in costs will also translate to significant premium increases for many Ohioans.

Question: If the state isn't exactly sure what these "increases in costs" mean in terms of dollars and cents in premiums, why did it issue a press release and hold a news call with reporters? The answer, according to the press release, was to "help health insurance consumers continue to prepare for the expected price increases." But the Department's real message seemed to be that insurers have no choice but to simply pass on some unidentified and unspecified costs.

A question the press might have explored: What costs? As I've explained recently, insurers consider lots of factors in determining premiums. These include the cost of medical services, how much more they can charge older people than younger ones, where policyholders live, how tough a state regulates them, what the competition looks like, their expenses in selling the policies--and the profits they'd like to earn. When actuaries mix these elements together, they arrive at a price, or a premium, that they hope will be low enough to entice shoppers to buy their products.

The Associated Press and The Columbus Dispatch picked up on the "analysis," and the AP's piece effort got a lot of pickup. Neither story was a model of clarity. It's fair to ask what Ohioans got from this reporting. Probably not much, except maybe another helping of confusion.

The AP story started with the department's thesis--that insurers' costs of covering Ohioans in the insurance shopping exchange (which will be run by the feds in Ohio, since the state opted out of running its own exchange) would be "significantly higher." The second graph continued:

That means individuals should also brace for potentially higher costs when purchasing coverage through the new insurance marketplace created by President Barack Obama's healthcare law, state officials said.

The third graph told readers that the state did not look at actual premiums, however. The fourth reported that Lt. Gov. Mary Taylor, a Republican who is also the director of the insurance department, noted that specific premiums will vary and could change when the state reviews them, but that "premiums will track very closely with the cost."

Taylor also said that benefits required by the law are "much richer" than the benefits previously available to Ohio consumers. What the heck did that mean to readers? And was that the reason for these higher costs? The AP didn't really explain, but did throw out some numbers, telling readers that "projected costs to the companies for providing the required health benefits under the law ranged from roughly $283 to $577 for individual plans." But for which plans--the bronze, the cheapest type offered in the exchanges; the silver plan; the gold plan; or the most expensive platinum plan, where coverage is top-notch. And who do these "costs" apply to--20 year olds? Or, 30, 40, or 60-year-olds? Numbers tossed out like confetti mean nothing without specifics.

At the end of the piece, the AP repeated what has become almost a standard graph in these kinds of stories: Young, healthy people will get rate increases, but older people will see rates decrease, leaving readers to think 60-year-olds will pay lower premiums than 25-year-olds. They won't. Older consumers will pay more--sometimes much more in absolute dollars.

The Columbus Dispatch piece was confusing, too. Its lede:

Health insurance companies would incur an average 88 percent increase in costs next year to pay for the health care of Ohioans who buy individual policies.

The paper explained that individual Ohioans wouldn't see their premiums increase that much, partly because many would get tax credits to help pay premiums. Indeed they will, but it's also highly unlikely a company would increase rates that much either. A look at the list of rate increases requested by Ohio insurers over the last couple of years for individual market policies show high increases, but nothing even close to approaching 88 percent. Most increases were in the teens and low twenties.

Still, the paper told readers that the average cost for insurers would be $420 per month--an increase of 88 percent from $223, which the paper said was the "current average cost to cover medical expenses for an individual health-insurance plan."

As noted, medical expenses are not the only thing that goes into the pricing mix. And the new policies sold in the exchanges will not be the same as policies sold last year--a point that Taylor did make to reporters. Her comment should have been a clue that a comparison isn't really possible, and especially a comparison as misleading as one that draws inferences only from unspecified costs.

Columnists on both the left and the right picked up the Ohio insurance department's misleading message. Jonathan Cohn, writing in The New Republic reported the "Department of Insurance announced that Ohioans buying insurance on their own should brace for premium increases that will average 88 percent next year." But later in his piece, he said the "88 percent figure is so useless"--because insurance officials paid no attention to the number of people enrolling in plans and did not account for different benefit levels.

In a rebuttal to Cohn, Philip Klein, a columnist for The Washington Examiner began his piece this way:

Ohio Department of insurance officials announced last week that average premiums in the Buckeye state would soar 88 percent once President Obama's health care law kicks in. The news added fuel to an already raging debate over Obamacare's effect on insurance costs.

Indeed it did. The department's press outreach--muddling premiums and costs--may have given birth to a false meme that news reporters and columnists should be wary of passing along.

In the end, it's the price of the insurance policy to a consumer that matters (along with what is in that policy) and the insurance department was not ready to tell the press what those prices will be.

At least the Dispatch got the headline right: "Insurance prices still unclear."

They are unclear in most states at the moment, and may be up until close to October 1, when the state exchanges open for business. Passing on spin from state insurance officials does not help ordinary people make decisions, and attributing price increases for insurance (or anything else) to unspecified "costs" does not help the public understand the high price of American healthcare

Submitters Bio:

Trudy Lieberman, a journalist for more than 40 years, is a contributing editor to the Columbia Journalism Review where she blogs about health care and retirement at www.cjr.org. Her blogposts are at http://www.cjr.org/author/trudy-lieberman-1/ She is also a fellow at the Center for Advancing Health where she blogs about health at http://www.preparedpatientforum.org/.   Her blog posts are at http://blog.preparedpatientforum.org/blog/category/author/trudy-lieberman/   Lieberman has had a long career at Consumer Reports specializing in insurance, health care and health care financing.   She was also the director of the Center for Consumer Health Choices at Consumers Union.   She is a contributor to The Nation, and has written a column about health and the marketplace for the Los Angeles Times.   Lieberman began her career as a consumer writer for the Detroit Free Press where her reporting became a model for consumer writers across the country.

She has won 26 national and regional reporting awards and other honors, including two National Magazine Awards, 10 National Press Club Awards, five Society of Professional Journalists Deadline Club Awards, a John J. McCloy Fellowship to study health care in Germany, a Joan Shorenstein Fellowship from Harvard University to study media coverage of medical technology, an honorary doctorate of humane letters from the University of Nebraska, and two Fulbright Fellowships---a senior scholar award to study health care in Japan and a senior specialist award to participate in training conferences in the United Kingdom for European health journalists.   She is the author of five books including Slanting the Story the Forces That Shape the News and the Consumer Reports Guide to Health Services for Seniors, which was named by Library Journal as one of the best consumer health books for 2000.

Lieberman is an adjunct associate professor of public health at City University of New York where she teaches courses on the media's influence on public health.   She was director of the health and medical reporting program at the Graduate School of Journalism, City University of New York, has taught media ethics in the Science, Health and Environmental Reporting Program at New York University, and has been an adjunct professor of journalism at Columbia University.   In 2006, she was a Beamer-Schneider SAGES Fellow at Case Western Reserve University where she taught courses on media ethics and the ethics of health care delivery.   In 2007, she was appointed the James H. Ottaway visiting journalism professor at SUNY New Paltz where she taught a course on the media and the marketplace.   In 2011, Lieberman was named the Soderlund Visiting Professor in the College of Journalism and Mass Communication at the University of Nebraska where she taught public affairs reporting.

Lieberman served five years as the president of the Association of Health Care Journalists, a professional organization of over 1300 journalists who cover health and medicine, and continues to serve on the board of directors as immediate past president.   She is currently a national advisory council member of the California Health Benefits Review Program.   She has served on the board of directors for the National Committee for Quality Assurance, the Medicare Rights Center, and Village Care of New York.   Lieberman appears on many panels and lectures widely on health care in the U.S.   She holds a B.S. with distinction from the University of Nebraska and earned a certificate in business and economics journalism from Columbia University's Graduate School of Journalism where she was a Knight-Bagehot Fellow in 1976-77.

She can be reached at trudy.lieberman@gmail.com and can be followed on Twitter at trudy_lieberman.