March 21, 2014
Families who signed up for a new Affordable Care Act-approved health insurance plan may be in for some serious sticker shock later this year, according to a round of interviews recently featured in The Hill. Some healthcare industry insiders are even suggesting that rates could double in certain parts of the country, although no one knows exactly which regions will bear the brunt of such rate increases. This news comes after an announcement from Health and Human Services (HHS) Secretary Kathleen Sebelius that rates would rise much more slowly in 2015 than in prior years, notes The Hill.
Several factors are at play when it comes to climbing premiums, including an 'adverse selection death spiral,' notes an article in Forbes, which is what happens when a risk pool attracts mostly older and sicker customers who are more likely to use healthcare services. This skews the risk pools, adding an additional expense to those who actually sign up and pay for coverage, and in many cases, making the cost of a policy out of reach for those who don't expect to use it. To make the risk pools work, the administration needs a certain percentage of young, healthy people to sign up and offset those costs, which isn't exactly what is happening. In fact, Forbes reports that many of the young people signing up for new plans are actually pregnant women who will also incur higher-than-average medical bills.
Another factor causing waves among insurers is that the Obama administration has cancelled or delayed several key provisions of the law, notes Forbes, causing uncertainty and angst over what insurers should charge. Among the most striking are the administration's choice to let consumers keep certain plans that do not meet the standards now required by the law, a move that will certainly keep more healthy people out of the exchanges and unable to offset costs for the old and sick.
As The Fiscal Times reported, some regions have more cause for concern than others, since insurers say that all premiums will not rise to the same degree. For example, areas with a younger and healthier risk pool and plenty of competition may not experience much of a rate increase at all. On the other hand, regions with sicker, older populations could see prices soar. Furthermore, the open enrollment period isn't officially over until the end of March, which leaves time for a final push in enrollment for the young and healthy.
According to Obamacare architect David Cutler, we'll have to wait and see who will get hit the hardest, although everyone should expect some sort of increase. "Health premiums increase every year, so the odds are very good that they will increase next year as well. None of that is news. The question is whether it will be a lot or a little," said Cutler to The Hill. "That depends in part on how big the insurers think the exchanges will be."
Compiled by Holly Johnson
"4 Reasons Why Obamacare Exchange Premiums May 'Double In Some Parts Of The Country' In 2015," Forbes, March 20, 2014, Avik Roy, http://www.forbes.com/sites/theapothecary/2014/03/20/4-reasons-why-obamacare-exchange-premiums-may-double-in-some-parts-of-the-country-in-2015/
"Insurers on Obamacare: Expect Premium Prices to Soar," The Fiscal Times, March 19, 2014, Brianna Ehley, http://www.thefiscaltimes.com/Articles/2014/03/19/Insurers-Obamacare-Expect-Premium-Prices-Soar
"O-Care premiums to skyrocket," The Hill, March 19, 2014, Elise Viebeck, http://thehill.com/blogs/healthwatch/health-reform-implementation/201136-obamacare-premiums-are-about-to-skyrocket