By: Sandy Fitzgerald and Martin Gould
Residents of states that refuse to set up health insurance exchanges under Obamacare are set to be hit with higher premiums under new rules announced by the Health and Human Services Department.
Insurance companies will be charged 3.5 percent of any premiums they sell through the federal exchanges, the department announced Friday.
And insurers are likely to pass that surcharge on to clients, leading to higher premiums.
The only states to be affected are those that refuse to set up their own exchanges because of opposition to the Patient Protection and Affordable Care Act. They are almost certain to be those under Republican control. In those states, HHS will set up the exchanges.
GOP governors are taking a hard line against implementing any part of the healthcare law, which will mean insurers in their states will need to pay the monthly fee, The Hill reports.
Arizona Gov. Jan Brewer announced this week that her state will not set up an exchange, calling the proposal “too expensive and too risky.” Her decision brings the total of states refusing to comply with the act’s provisions up to 17.
The exchanges were supposed to be up and running in all states by 2014. HHS plans to charge insurers 3.5 percent of the premiums for each plan they sell through the federal exchange.
There are still some states that haven’t yet decided whether to set up their own exchanges or use the federal exchange option, so it’s not yet known how much money the HHS will collect from insurance companies. In addition, HHS said it might change the user fees later on as more people enroll through the exchanges.
But exchanges that don’t attract enough insurers may make the companies carry larger percentages of unhealthy and thus expensive, patients, making them appeal even less to customers.
“It is important to keep in mind that any new fees to pay for the administration of exchanges will add to the cost of coverage, and that is why the focus needs to be on reducing administrative costs, streamlining operations, and avoiding regulatory duplication that will add complexity and increase costs,” America’s Health Insurance Plans (AHIP) said in a statement on the new rules.
The regulations also show how the government plans to redistribute money to help insurers with expensive clients stay afloat, as Obamacare provides fees to help companies offset the costs of taking on numerous unhealthy patients. The Obama administration says the process is designed to make sure one insurance company doesn’t get stuck with an unhealthy risk pool.