Tuesday, April 8, 2014
Will Obamacare premiums rise significantly upon 2015 renewal
Health industry officials say ObamaCare related premiums will double in some parts of the country, differing from comments recently made by the Obama administration. The expected rate hikes will be announced in the coming months. Large premium increases would likely bolster the GOPs prospects in November and hamper ObamaCare insurance enrollment efforts in 2015. The industry complaints come less than a week after Health and Human Services (HHS) Secretary Kathleen Sebelius sought to downplay concerns about rising premiums in the healthcare sector. She told lawmakers rates would increase in 2015 but grow more slowly than in the past. The increases are far less significant than what they were prior to the Affordable Care Act, the secretary said in testimony before the House Ways and Means Committee. Her comment baffled insurance officials, who said it runs counter to the industrys consensus about next year. A senior insurance executive who requested anonymity said "Its pretty shortsighted because I think everybody knows that the way the exchange has rolled out is going to lead to higher costs". The insurance official, who hails from a populous swing state, said his company expects to triple its rates next year on the ObamaCare exchange. The hikes are expected to vary substantially by region, state and carrier. Areas of the country with older, sicker or smaller populations are likely to be hit hardest, while others might not see substantial increases at all. Several major companies have been bullish on the healthcare law as a growth opportunity. With investors, especially, the firms downplay the consequences of more older, sicker enrollees in the risk pool. After some stories were published about premium increase in 2015, the administration pointed to some independent analyses that have cast doubt on whether the current mix of enrollees will lead to premium hikes. ObamaCare also includes several programs designed to ease the transition and stave off premium increases. Reinsurance, for example, will send payments to insurers to help shoulder the cost of covering sick patients. Insurance officials are quick to emphasize that any spikes would be a consequence of delays and changes in ObamaCares rollout. They point out that the administration, after a massive public outcry, eased their policies to allow people to keep their old health plans. That kept some healthy people in place, instead of making them jump into the new exchanges. Federal health officials have also limited the amount of money the government can spend to help insurers cover the cost of new, sick patients. Insurers have been disappointed that young people only make up about 25% of the enrollees in plans through the insurance exchanges, according to public figures that were released earlier this year. The exchanges are hoping that changed with individuals their 20s and 30s signing up at the March 31 enrollment deadline. Many insurers, however, dont share that optimism. Republicans frequently highlight President Obamas promise on the campaign trail to enact a healthcare law that would cut the cost of a typical familys premium by up to $2,500 a year. The Obama administration may have to backpedal on that, according to some industry experts. Insurers will begin the process this spring by filing their rate proposals with state officials. Insurance commissioners will then release the rates sometime this summer, usually when they are approved. Insurers could also leak their rates earlier as a political statement. In some states, commissioners have the authority to deny certain rate increases, which could help prevent the most drastic hikes. In any case, there may well be a slew of bad headlines for the Obama administration just months before the election. Its pretty bad timing, said one insurance official. There are other health experts who say predictions about premiums are premature. David Cutler, who has been called an architect of Obama-Care, said, Health premiums increase every year, so the odds are very good that they will increase next year as well. None of that is news. The question is whether it will be a lot or a little. That depends in part on how big the insurers think the exchanges will be. Jon Gruber, who also helped design the Affordable Care Act, said, The bottom line is that we just dont know. Premiums were rising 7 to 10 percent a year before the law. So the question is whether we will see a continuation of that sort of single digit increase, as Sebelius said, or whether it will be larger. Political operatives will be watching premium increases this summer, most notably in states where there are contested Senate races. In Iowa, which hosts the first presidential caucus in the nation and has a competitive Senate race this year, rates are expected to rise 100 percent on the exchange and by double digits on the larger, employer-based market, according to a February 2013 article in the Business Record. So the question is will rates rise by more than the 7-10% on average prior to 2014?