The training wheels are about to come off for Obamacare's insurers, and that could mean much higher premiums for enrollees.
Some government programs intended to buffer insurance companies from losses in the Obamacare marketplaces are set to expire in 2017. That is leading experts to project that the loss of the federal payments could translate to higher rates for enrollees next year.
Some states have started to release proposed rates for 2017, including Oregon, whose providers are asking for increases of up to 30 percent.
The Affordable Care Act created the reinsurance program to help entice insurers to provide plans when the market started in 2014. It was supposed to pay insurers for major losses since insurers didn't know who was going to sign up for Obamacare in 2014, or how sick — and expensive — they would be.
Reinsurance was intended to reduce some of the risk of offering plans in Obamacare, but the program expires this year. The administration believed that after this year, insurers would have a good idea of how to price plans and who will sign up.
Reinsurance and another program called risk corridors pay insurers that have high claims costs for enrollees. Another program called risk adjustment transfers funds from lower-risk plans to high-risk plans. That program will remain intact in 2017.
However, the loss of reinsurance and risk corridors could raise premiums, according to an analysis from the nonpartisan Kaiser Family Foundation.
Reinsurance payments in 2016 reduced nongroup premiums by up to 6 percent, Kaiser said.
"Without the reinsurance program, insurers will need to raise their premiums in 2017 by a comparable percentage to make up for the loss of the reinsurance funds," the analysis said.
America's Health Insurance Plans, the industry's leading lobbying group, also warned about the loss of reinsurance and the risk corridor program.
"The phaseout of these programs is expected to place upward pressure on rates for the 2017 plan year," the group wrote in a recent brief.
Other experts say an uptick in premiums next year may not be attributable to just the loss of the reinsurance program. Insurers could raise premiums by between 12 and 15 percent to help compensate for low prices when Obamacare was implemented in 2014, said Caroline Pearson, senior vice president of Avalere Health.
Pearson said that when insurers set their prices in 2013 they thought more people would sign up for Obamacare and, therefore, the number of healthy people would be robust.
The fact that enrollment has been lower than expected has created problems in the insurance risk pool, she said.
Pearson has called the rate hikes this year a "market correction" because prior rates were set "perpetually too low to cover the cost of the population."
Massive rate hikes and lower-than-expected enrollment have prompted opponents of Obamacare to say the law isn't working.
Younger and healthier patients are, by the millions, choosing to forego health insurance and pay fines rather than enter the individual insurance market," Sen. Orrin Hatch, R-Utah, said during a speech before the Senate in December. "As a result, premiums are going up all over the country. Premium spikes in the double digits have been increasingly common in the current open enrollment period."
Insurers will receive some relief next year thanks to a moratorium on a health insurance tax. The latest spending bill included a one-year moratorium on the tax.
That should lead to a 3 percent reduction in costs and premiums across the board, Kaiser said.
Insurers had to submit their proposed Obamacare rates to states by May 11. Any rates that climb more than 10 percent must be disclosed.
Some states already have released proposed rates. Insurers in Oregon have called for rates of up to 32 percent, with some proposing to lower rates by up to 3 percent.
Meanwhile, California's Obamacare exchange expects health insurance premiums to increase by 8 percent next year. Covered California, the state's exchange, said the projected increase is driven by the expiration of the reinsurance program and the risk corridor program.
"After 2017, premiums are forecast to increase at 5 percent each year," Covered California said in its proposed budget.
Major insurers also have predicted higher premiums. Humana said during a recent investor call that it will look into pulling out of some Obamacare markets or will raise prices.
Another insurance giant, UnitedHealth, said it would exit a majority of Obamacare's markets next year due to mounting financial losses.
Last year, high proposed rates of up to 60 percent in some parts of the country dominated headlines.
But premiums rose only 4 percent in 2016 from 2015, according to a White House report released earlier this year. That is because state regulators negotiated with insurers to bring down some of those high rates.
The Department of Health and Human Services has said that the preliminary rates aren't final and that they often change significantly from the time they are proposed. The rates have to be finalized before open enrollment in Obamacare starts in November.
In addition, tax credits given to low-income enrollees will increase with the premiums. About 85 percent of marketplace enrollees receive tax credits.