Major insurers in the next few weeks will give a crucial report on how they are faring in Obamacare this year, with a big insurance giant already fleeing some Obamacare markets and an expert saying that higher premiums may be on the horizon.
Over the next three weeks, insurers will post financial results for the first quarter, a key barometer for gauging the financial health of Obamacare. Soon after, states will start to disclose proposed increases in premiums for their Obamacare plans next year.
"The tea leaves mostly point to bigger premium increases in the [Affordable Care Act] marketplaces for 2017," said Larry Levitt, senior vice president for special initiatives for the nonpartisan Kaiser Family Foundation.
Levitt said many insurers have been losing money in the marketplace "so something has to give. They're either going to drop out because they can't offer competitive plans and turn a profit, or they're going to raise premiums."
Levitt noted that would be a normal market correction, but "it will likely get outsized attention in an election year."
However, even with rate hikes, the impact on most customers could be eased through increases in tax credits so long "as they enroll in one of the two lowest-cost plans in their area," he said.
Insurers must get any rate increases approved by state or federal regulators before they can be offered to consumers. Under Obamacare, an insurer seeking a rate hike of 10 percent or more must publicly disclose such increases and the justification for them.
Last year, Obamacare opponents seized on large proposed rate increases of 50 percent or more in some states to argue that the program is not working.
But such increases can be deceiving as the proposals can change by the time they're finalized, experts said.
"As you are looking at the rate filing process, proposed to final, there can be significant change," said Elizabeth Pearson, senior vice president for Avalere Healthcare. "I think that premium increases, or in some cases reductions, will really depend on the individual carrier and the markets they are operating in."
The administration recently sent out a report attempting to debunk a report from the consulting firm McKinsey & Company that suggested double-digit increases in 2016 Obamacare rates.
The report emphasized that the actual premiums are much lower because of negotiations between regulators and the insurer.
In addition, about 85 percent of consumers on healthcare.gov, used by 38 states and the District of Columbia, receive tax credits to help pay down the cost of insurance. Such credits increase alongside any premium hikes.
In 2016, the average monthly net premium increased by 4 percent from 2015, the report said.
Something that can help keep premium increases down is a tax holiday that Congress provided for insurance companies, Levitt said. In the latest budget deal, Congress gave insurers a one-year moratorium on a health insurance tax.
Meanwhile, insurers will be announcing their financial results for the first quarter of the year over the next several weeks.
Recently, UnitedHealth, the largest U.S. insurer, announced it was pulling out of Obamacare exchanges in Michigan, Georgia and Arkansas. The move comes as UnitedHealth posted a $425 million loss last year in the exchange business.
UnitedHealth previously has considered leaving all of Obamacare's exchanges.
Other major insurers have had financial problems linked to the exchanges, including losses.
Anthem, a major Obamacare insurer, said in January the individual market business, which Obamacare mainly comprises, was profitable last year but below target.
Enrollment last year in the exchanges for Anthem was about 791,000, about 30 percent below the amount it expected.
However, Anthem and other major insurers have said they remain committed to the exchanges in hopes that they stabilize.
Levitt tamped down any fears that Obamacare is vulnerable to a death spiral, which refers to an insurance market that has prices rapidly increase due to too many sick customers and healthy people dropping out.
"I see no signs of that happening," he told the Washington Examiner. "Enrollment has been growing and the premium subsidies provide a cushion that helps stabilize the market. Most insurers still see the [Affordable Care Act] as a good business opportunity in the long term."