The media is once again engaged in its annual hysteria over headline rate increases in the Affordable Care Act aka “ObamaCare” ahead of the federal health insurance marketplace enrollment period beginning November 1.
Simon Malloy at Salon explains, Obamacare’s 2017 rate hike coverage has been simplistic and possibly misleading:
In keeping with the now-familiar pattern of Affordable Care Act coverage, we find ourselves having to balance substantial progress with not-so-great setbacks. The good news came last month with reports that the national uninsured rate had been cut nearly in half since 2010 to 8.6 percent of the population – the first time it had ever dropped below 9 percent. That’s a massive reduction, and tangible proof that the ACA is doing some real good.
Now for the not-so-great stuff. The Department of Health and Human Services released a report this week stating that it expects premiums for benchmark “silver” health plans in the state-based exchanges to rise by an average of 22 percent in 2017. That news is predictably becoming a talking point for anti-Obamacare Republicans on the campaign trail, so let’s add some context to get a clearer picture of what’s going on.
Note: From the HHS press release that the media did not report, More Than 70 Percent of Consumers Can Find Marketplace Plans for Less than $75 Per Month:
Adjustments this year reflect issuers bringing their rates in line with observed costs, now that two years of data are available. In addition, some of the ACA’s programs designed to support the new market in its early years are ending this year, putting additional one-time pressure on premium growth. Issuers are continuing to adapt to a new market that looks very different than it did before the ACA: one where they compete based on price and quality, rather than by finding the healthiest customers. Efforts to undermine the ACA, such as certain states’ decisions not to expand Medicaid and Congressional actions to block funding for the law, contribute to higher premiums as well. And some states have long faced unique challenges in reining in health care costs.
For the median HealthCare.gov consumer, the benchmark second-lowest silver plan premium is increasing by 16 percent this year, before taking into account the effects of financial assistance; that is, half of HealthCare.gov consumers are seeing increases less than, and half greater than, 16 percent. But experiences across states vary widely. For example, in Arkansas, Indiana, Michigan, Nevada, New Hampshire, New Jersey, North Dakota, and Ohio, as well as in California and Massachusetts (which do not use the HealthCare.gov platform), benchmark premiums are rising by 7 percent or less. In most of these states, Marketplaces are also strongly competitive, and several have seen issuers expanding their service areas, as with Molina in Ohio or Humana in Michigan. These examples illustrate that there are parts of the country where Marketplaces are already maturing, reaching stable price points, and enjoying robust competition.
Conversely, some states are experiencing high benchmark premium growth, resulting in a HealthCare.gov average higher than the median increase. A number of the states in this group, including Arizona, Hawaii, Illinois, Kansas, and Pennsylvania, are places where 2016 rates were especially far below the national average or especially far below the cost of comparable coverage in the employer market.
Fortunately, financial assistance and the ability to shop around for coverage protect most consumers across the country from headline rate increases. “Before the ACA, many consumers were unable to get health coverage at all, and the individual market offered no easy way to shop and compare plans,” said Kevin Counihan, CEO of the Health Insurance Marketplace. “Because of the Marketplace, consumers can shop around to find coverage that fits their needs and get tax credits to help pay for it. Thanks to shopping and financial assistance, consumers will continue to have robust options for quality, affordable coverage for 2017, even in places where premium increases are high.”
Back to Salon:
News of the expected premium hikes followed announcements from major insurers that they were backing out of the Obamacare exchanges due to profitability concerns. Put simply, too many old, sick people were buying plans and not enough young, healthy people were signing up. That same dynamic helps explain why HHS believes premiums will jump in 2017 — when that balance of sick and healthy customers is out of whack, insurers move to cover their costs by raising premiums. As Vox’s Sarah Kliff writes, actual enrollment in the state exchanges is well short of where the Congressional Budget Office assumed it would be by this point.
It’s important to note, however, that these expected rate changes apply only to the roughly 10 million people who obtain their coverage through the state marketplaces. For the approximately 150 million people who are covered through their employer, this announcement won’t have any impact.
Note: The Society for Human Resource Management reports, Employers Project Health Premium Hike of 6% in 2017 (excerpt):
Health care benefit cost increases at large U.S. employers are expected to hold steady at 6 percent in 2017. The good news is that health premiums are not growing at a faster clip year after year, as they were a decade ago. The bad news is that the increase in health plan costs still outpaces general inflation in the U.S., which remains below 2 percent, and salary budget increases, which are holding at around 3 percent.
“Controlling health benefits costs remains a high priority” for corporate management, Marcotte said on Aug. 9 when NBGH released the findings from its Large Employers’ 2017 Health Plan Design Survey at a press conference in Washington, D.C.
According to the survey, the 6 percent increase projected for 2017 is identical to the increase employers would have experienced in each of the past two years had they not made changes to their plan design. But many employers expect to hold increases to 5 percent by making some changes to their plans.
And compared with plans available on the Affordable Care Act’s public exchanges, employer-based group coverage is a deal.
“Current estimates have health insurance premiums for the average public exchange plan increasing by at least 10 percent, about twice what large employers are projecting for next year,” said Marcotte. “This is a clear indication that the employer-based health care model continues to be the most effective way to provide health insurance coverage to employees and their families.”
Fueling the overall growth in the cost of health benefits is a surge in spending on pharmaceuticals–the newest, high-cost specialty drugs in particular.
Nearly a third of respondents (31 percent) indicated specialty pharmacy was the highest driver of health costs, up from 6 percent in 2014.
So Big Pharma again!
Back to Salon:
[T]he 22 percent estimate does not take into account federal subsidies for insurance coverage or the chance that a consumer will shop around for a better deal. The ACA imposes limits on how much of a person’s income can be spent on monthly premiums. According to HHS data, 83 percent of enrollees in the state marketplaces qualified for tax credits of some kind, so they should be protected to varying degrees from a spike in premiums. The people who will get hit hardest are the wealthier households and individuals who aren’t eligible for subsidies and live in states like Arizona, Oklahoma and Tennessee, where premiums are expected to shoot up dramatically.
So that’s not good. And the round of bad press this news is generating won’t make things any easier for Obamacare in the short term. As I wrote a couple of months ago, many of the problems facing the ACA’s state marketplaces can be resolved by boosting enrollment: More healthy people buying insurance makes the marketplaces more attractive to insurers and should help to keep costs down.
Cronkite News at the Arizona Daily Sun actually gets the reporting right, unlike every other news organization in Arizona. Arizona faces steepest Obamacare hike in U.S.; subsidies could curb pain:
Arizona residents can expect to see the largest rate increases in the nation when open enrollment for Obamacare begins next week, but advocates say those increases should be offset by similarly large increases in tax credits for consumers.
A Monday report by the Department of Health and Human Services said a 27-year-old Arizona resident with a mid-range insurance plan in the Affordable Care Act marketplace could see a 116 percent increase in premiums next year, more than four times the national average of 25 percent.
But that’s before the tax credit the vast majority of consumers get under Obamacare to help them pay for their coverage. Once that is applied, according to department estimates, about 78 percent of Arizonans in the health care marketplace could end up paying less than $100 a month for insurance – with 70 percent paying less than $50, according to HHS.
While benchmark premiums will increase next year, so will the tax credits that will help compensate, according to the report.
“Most people who purchase through this market are doing so so that they can get that subsidy,” said Cynthia Cox, an associate director of health reform and private insurance at the Kaiser Family Foundation.
Cox said it “would be less common” for Arizona residents to pay the full premium price.
HHS Secretary Sylvia Burwell said in a statement Monday that not only could currently uninsured Arizonans also qualify for subsidies but so “could 33,000 Arizonans currently paying full price for off-Marketplace coverage.”
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[S]ix companies that had offered coverage in Arizona pulled out of the exchange for next year after suffering financial losses in the marketplace.
Cox blamed the losses, and the subsequent increase in premiums that Arizona residents face next year, on the fact that the state had “abnormally low” premiums in 2016.
Insurers didn’t know where to set prices when the marketplace opened in 2013 because “they had very little information to work with when setting these premiums, this was the first year that the newly required market was going to be in place,” she said.
Arizona was among states that had “some of the lowest premiums in the country and were abnormally low in the first couple of years. Now premiums need to increase in order for insurers to cover their costs,” Cox said.
While they saw the shakeout coming, health policy experts said the response of the consumers to the higher prices could have a lasting effect on the success of Obamacare.
“This open enrollment period could be pivotal for the future of the marketplace,” said Larry Levitt, senior vice president for special initiatives at the Kaiser Family Foundation. “One area of uncertainty is how consumers will react to these premium increases.”
The New York Times editorialized today, Affordable Care Act Premium Increases Are a Fixable Problem. The Washington Post similarly editorialized, Obamacare is not ‘blowing up.’ But it does need fixing.
It’s time to get rid of the obstructionist Tea-Publicans in Congress and to elect a Democratic Senate and Congress who will make these fixes to improve ObamaCare, rather than to repeal ObamaCare and to take health care away from millions of Americans who desperately need it.