Supporters of President Obama’s health care law have been touting proposed insurance rates for 2015 — arguing that they aren’t as high as some of the dire warnings of the law’s critics.
But it’s worth considering some additional context.
Data compiled by the Health Research Institute of PricewaterhouseCoopers from about 29 states plus the District of Columbia show that the average premium increase for insurance starting next year is currently 8.2 percent. But within that average, there’s a wide range.
In Arizona, for instance, the average premium increase submitted was 11.2 percent, but rates ranged from a decrease of 23 percent to a spike of 27 percent. In Arkansas, where the average increase was 11.2 percent, some consumers could see their premiums soar by 50 percent.
Defenders of Obamacare argue that rates typically went up annually before the law went into effect.
However, it’s important to keep in mind that it was Obama himself who repeatedly promised that premiums would go down by an average of $2,500 per family. His promise wasn’t that he would overhaul the health care system so that premiums would continue to increase each year, just as they did in the system that existed before he was elected, which he argued was unacceptable.
Additionally, any increases in premiums in 2015 will be on top of the premium increases that occurred during 2014.
For instance, Covered California announced last month that the average statewide increase in premiums would be 4.2 percent in 2015. But the Los Angeles Times reported that the state’s insurance commissioner, Dave Jones, said residents of California have paid between 22 percent and 88 percent more for health insurance in 2014 than they did last year, before Obamacare's major provisions went into effect.
Data, graphic: PricewaterhouseCoopersPremiums have been facing upward pressure because the health care law imposes a raft of new regulations on insurance policies, shifting costs of covering older and sicker Americans onto younger and healthier individuals.
And the longer-term challenge facing Obamacare is that a number of the measures intended to stabilize the growth of premiums in the early years of the law’s implementation are scheduled to expire after 2016.
Known in the health care policy community as the “Three Rs” (for Reinsurance, Risk Corridors, and Risk Adjustment), the provisions combine to absorb and redistribute the risk that insurers are taking on, so that the market doesn’t fall apart as certain insurers get stuck only with the oldest and sickest beneficiaries, who insurers are now forced to cover.
Under the risk corridors program, the Department of Health and Human Services provides payments to insurers who rack up larger than expected losses, theoretically paid for with payments from insurers who do better than expected. Because of the potential that it could cost taxpayers money, it has been criticized as a bailout.
Whatever one wishes to call it, the program is slated to expire after 2016 along with the reinsurance program, which raises fees to provide funding to insurers that incur overly costly medical claims.
The influence of these programs could be seen in Connecticut. Earlier this month, Anthem Blue Cross and Blue Shield said it would decrease premiums by 0.1 percent in 2015 — weeks after the Connecticut Insurance Department rejected its approval for a 12.5 percent hike.
A reason for the turnaround was that, in the letter rejecting the rate proposal, regulators said Anthem hadn’t adequately accounted for the federal funds that would flow to them through the reinsurance program.
So, an open question remains as to what will happen to rates in 2017, once these shock absorbers are removed.