How New Health Insurance Regulations Could Affect Some Premiums, Coverage

As he trumpeted what he called a new “Patient’s Bill of Rights” Tuesday, President Barack Obama tried to calm fears that the new health law would increase insurance costs.

The details of the law’s potential impact came in the 196 pages of new regulations simultaneously released by the federal departments of Labor, Treasury and Health and Human Services detailing how Americans could be affected by some of the law’s provisions that take effect in September.

But the new details about the effects of the law failed to convince some critics. “Given its track record of broken health care promises, it’s a mystery why the Administration would make even more they can’t keep,” Sen. Orrin Hatch, R-Utah, said in a statement posted on his website. “This shouldn’t be called a health care bill of rights, but a bill of goods that the American people aren’t buying. … The facts speak for themselves – this $2.5 trillion health law increases costs, raises taxes, slashes Medicare for a new, unsustainable entitlement, and adds to our already record debt.” 

Using a combination of government, industry and think tank reports, the Obama administration estimated that the regulations’ impact on the cost of health insurance will be quite low. And, the number of people who will be helped by some of the law’s key provisions taking effect in September may also be lower than some might expect.

Here are some highlights:

–The law’s provision stopping insurers from denying coverage to children with pre-existing medical conditions could immediately help 32,000-79,000 uninsured children gain coverage as well as 90,000 children who have insurance but with certain benefits excluded for pre-existing conditions. Average premium increase: 1 percent or less.

–The provision restricting annual limits on benefits would help 2,700 to 3,500 people who exceed such limits each year. About 18 million Americans are in plans with annual dollar limits on benefits, with $1.5 million as the most common limit. After policyholders reach the limit, they are denied coverage for additional benefits that year and have to pay doctors and hospitals whatever the insurance company doesn’t cover. Annual limits would gradually be eliminated starting Sept. 23 when the limit will be no lower than $750,000. The limit will be raised to $1.25 million in September 2011 and $2 million in September 2012. Annual limits will be prohibited starting in 2014. 

The elimination of lifetime limits would extend coverage to an estimated 18,650 to 20,400 people who would be expected to exceed a lifetime limit each year. Average premium increase: Up to 5.1 percent on plans with current annual limits of $250,000. But these plans make up 0.5 percent of the insurance market. Most people in policies with annual limits would see increases in premiums below 1 percent. The rest of us would see less than 0.5 percent premium hike.

–Insurers are prohibited from dropping coverage for customers after they get sick, a practice known as rescission, which would help about 10,700 people a year. Average premium increase: Less than 1 percent

In the regulations, the Obama administration warned that the effects on premiums from different provisions should not be added together to get a cumulative impact because “disentangling the effects of each provision is impossible. … This is especially so given the complex interactions among the policies.”

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