A study commissioned by the state government of California revealed that the federal health reform law can cause health insurance premiums to increase for some sectors. It also suggested that government subsidies will work to offset premium increases for those who are eligible for the subsidies, mostly low-income consumers.

California is the ideal state to commission the study, as it is way ahead of other states in establishing a competitive insurance exchange or “marketplace”. In it, consumers, particularly individuals and small businesses, can purchase low-priced and high quality insurance coverage. Insurance companies will be hard pressed to offer good priced insurance policies offering a high quality of service.

The commissioned study suggests that health insurance premiums can increase to around 30 percent for people with high income who are not qualified to avail of insurance subsidies offered by the government. But this high-income group stands to benefit from their new out-of-pocket limits bringing down the expected increase in premiums to just about 20 percent.

The factors cited in the report for the anticipated higher premiums are many. One major factor is the entry of low-income consumers into the market for individual insurance. Another is the requirement imposed on insurance companies to provide a better quality of health insurance benefits. There are also the new taxes and fees imposed by state and federal agencies on insurance companies that are sure to be passed on to consumers.

Experts believe that the cost of health insurance will be relatively more affordable for people suffering from chronic illnesses, as it becomes more expensive for people who are healthy. It may mean though that those who are quite healthy will decide to drop their health coverage altogether because of the high premium costs. This is certainly not an ideal situation, and goes against the main goal of the health reform law which is to ensure that all Americans have health insurance coverage.

On the positive side, the study suggests that those who are in the low-income group will enjoy considerable reductions in their insurance premiums as well as their out-of-pocket expenses. This is in part due to the tax credits and all the other government subsidies offered to help bring down the cost of insurance. An expected 76 percent decline on the cost of care is expected for people who have insurance now.

The report was commissioned by the state of California to assist the government in assessing the proposals submitted by insurance companies. It was also prepared for use in the development of marketing campaigns aimed at reaching out to consumers. The findings however, appear to find application in most insurance exchanges and states. The state anticipates roughly 5.3 million people will be eligible and qualified to buy health insurance coverage through the state’s insurance exchange by October 2013. Experts are confident that based on the insights revealed by the report, most consumers who are going to purchase insurance through the exchange will have a positive experience.

Like the California report, a study conducted by the Society of Actuaries also suggested that the health reform law will increase insurance costs in the coming years. U.S. Health and Human Services Secretary Kathleen Sebelius admits that the health reform law, particularly the establishment of health insurance exchanges would cause health care costs to rise in the market for individual insurance especially for men and for the younger set. The reform law blocks insurance companies from imposing charges on women more than the men. The law also limits insurance companies from setting higher priced premiums purely on the basis of age.

Republican politicians on the other hand declared that the study conducted by the Society of Actuaries regarding the health reform law validated their initial concerns that insurance premiums for individual policies will increase. The law also dictates that no insurance company can deny health coverage nor impose higher premiums on consumers with pre-existing conditions. Experts say that higher insurance premiums will also be experienced by average consumers who already have coverage as they will fall under a new risk pool. This pool will also include consumers who used to have a hard time getting coverage due to their health condition.

The administration of U.S. President Barack Obama dismissed the premium rate shock fears as overblown. The administration believes that consumers can obtain low-cost health plans that are of higher quality and provide a more efficient system of health care. It also predicts that most of the new consumers that will acquire a health plan through the insurance exchanges will be healthier and younger than the population that is already insured.