New York will reject premium increases on Obamacare plans that are caused by the zeroing out of the penalty on the uninsured, Democratic Gov. Andrew Cuomo announced Monday.
Insurers in New York have already asked to increase the rates of premiums for Obamacare plans by an average of 24 percent, or roughly $1,500 more per year. They are attributing half of the increase to the zeroing out of the fine on people who don’t have health insurance, known as an “individual mandate.”
Cuomo in a speech Monday at Mount Sinai Hospital in New York appeared to be pushing back on the proposals. He said that if state officials were to allow the proposed rate increases to go into effect, then insurers would pocket millions of dollars and that costs would increase for customers. He announced he was directing the Department of Financial Services to reject any rate increases associated with the penalty going away.
The prices, he said, “must be based on actual cost and not political manipulations.”
Throughout his speech, Cuomo suggested that President Trump was threatening to take away the penalty, but the Republican-backed tax bill signed into law late last year zeroes it out for 2019. The individual mandate would otherwise cost $695 per person, or 2.5 percent of income, whichever is higher.
It’s not clear how effective the individual mandate has been at getting people to sign up for health insurance who would not have otherwise. The provision, one of the most unpopular parts of the healthcare law, was intended as an impetus to make people buy health insurance who would otherwise choose to go without it. Certain supporters of the mandate have argued that the mandate could have been more effective if the fines involved had been higher and fewer exemptions had been created.
Insurers have been filing to sell Obamacare plans that will go into effect in 2019, and in some states they appear to be pricing in for the fact that the mandate is going away next year. Other states are seeing mild increases, but that is in part because they saw significant hikes for the previous year.
Insurers have concluded that fewer people will enroll without the mandate than otherwise, so in some places they are pricing their plans higher based on the assumption that sicker people will be left behind, which will increase medical costs for those left.
Cuomo warned that allowing insurers to raise prices based on what they would propose would cause people to “drop insurance and the exchange would collapse.”
“That is what they are trying to do,” he said of the Trump administration. “It is Machiavellian. It is duplicitous. You are creating anxiety for millions and millions of people across the country. It’s almost diabolical.”
Leslie Moran, senior vice president at the New York Health Plan Association, said that the organization agreed that “decisions on health insurance premiums should be based on math not politics.” She pointed to state and federal estimates that projected premiums would increase roughly 10 percent without the penalty.
“A key priority must be maintaining a stable marketplace in New York,” Moran said. “Politicizing the 2019 rate requests will not help in this effort.”
The coverage offered on the exchange tends to be purchased by people who are self-employed or work for a small business that doesn’t provide health insurance. How much customers pay for coverage through their Obamacare plans can vary based on whether they smoke, how old they are, where they live, and whether their income is low enough to qualify for subsidies, with a cutoff at about $48,000 a year.
Even with prices increasing, the amount of money that subsidized customers pay is capped, because the federal government chips in more to make up for the increases. Insurers also restructured their plans after Trump ended the authorization of payments known as cost-sharing reduction subsidies. To make up for the difference, they loaded more subsidies onto certain plans, which resulted in some customers signing up for plans for as little as $0 a month.
