Insurance costs spike, opening new Republican attacks on health law

Republicans seized on a new report showing a spike in insurance premiums to argue President Obama’s healthcare law has failed to reduce costs.

The report from the Kaiser Family Foundation, which found that the cost of employer-provided family plans increased by 9 percent to an average of $15,073 in 2011, put the White House on defense a day after it became more likely that the Supreme Court will hear a challenge to the law before the 2012 election.

It showed healthcare costs are rising much faster than U.S. wages and salaries or the rate of inflation. The steep costs could put an extra pinch on households struggling through an extended housing crisis and high unemployment.

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Republicans were quick to point out that President Obama during his presidential campaign made the ill-conceived promise that health reform would lower premiums by $2,500.

“As this survey shows, the president's promise that his partisan health law would lower costs was just empty rhetoric,” Sen. Orrin Hatch (R-Utah), the top Republican on the tax-writing Senate Finance Committee, said in a statement. “The fact is employers aren't hiring, in large part, because they have to spend more and more money on health insurance.”

The insurance industry also went on the attack, and said private health plans weren’t to blame.

“This report is just the latest warning that far more needs to be done to address the rising cost of health care,” Karen Ignagni, president and CEO of America's Health Insurance Plans, said in a statement. “Policymakers in Washington and the states need to focus on all of the factors that are driving premium increases: soaring prices for medical services, changes in the covered population that has resulted in an older and sicker risk pool, and new benefit and coverage mandates that add to the cost of insurance.”

The administration responded with a strong defense of the healthcare law and its benefits for consumers, and pointed out that the Kaiser study was retrospective.

“The Kaiser report is informative,” White House deputy chief of staff Nancy-Ann DeParle wrote on the White House blog, “but it's a look backwards. When we look to the future, we know that the Affordable Care Act will help make insurance more affordable for families and businesses across the country.”

The post went on to point out that the average premium for the 8 million people enrolled in the Federal Employees Health Benefits program will increase by 3.8 percent in 2012 — a little more than half of the 7.3 percent increase in premiums for 2011. DeParle argued that those rates offer “important insight into the premiums large employers are negotiating with insurers for the coming year.”

Another sign that the healthcare law might be reducing the rate at which insurance costs are rising came last week from the consulting firm Mercer. It estimated that employers’ health insurance costs would increase by an average of 5.4 percent next year, the slowest growth rate since 1997.

Democrats are also passing around a Goldman Sachs commentary that raises questions with Kaiser's numbers.

“The acceleration in the rate of increase under the Kaiser survey conflicts with almost all other survey and industry data points that show 2011 increases about the same or lower as compared to 2010,” the investment bank said.

“We speculate that the Kaiser survey data sample could be somewhat distorted by the anomalously low rate of increase found for 2010 (i.e., 3%) which conflicted - both directionally and in absolute terms - with most other indicators of pricing for last year. The low finding under last year's survey may, in turn, have upwardly inflated the rate of increase found under this year's survey.”

According to Kaiser, the health law is only responsible for about a sixth of the increase because of provisions such as the requirement that plans cover young adults on family policies and offer preventive health benefits without co-pays.

“Critics of the national health reform law passed in 2010 like to blame everything but the weather on 'Obamacare',” wrote Drew Altman, the foundation's president and CEO, “but regardless of how you feel about the Affordable Care Act, its effect on premiums this year is modest.”

For their part, Republicans pointed out that the survey shows that only a little more than half (56 percent) of workers are in plans that pre-date the law and that the number of small businesses offering coverage dropped 11 percentage points despite the law's temporary tax credits.

DeParle said new rules under the healthcare law now require insurance plans to justify rate increases of 10 percent or more and to spend at least 80 percent of premiums on care. The Kaiser survey also highlighted that employers added 2.3 million young adults to their parents’ family health insurance policies as a result of the reform law.

“The law is helping millions of young adults to obtain health coverage,” Gary Claxton, the study's lead author, said in a news release. “In the past, many of these young adults would have lost coverage when they left home or graduated college.”

This story was first posted at 11:08 a.m. and was updated at 3 p.m.