Higher Rates Reported for the Affordable Care Act
The stage is set nationally for the next annual round of premium increases for health coverage through the Affordable Care Act. Several recent reports have predicted double-digit rate increases for next year in many states.
“Obamacare Prices Expected to Spike,” screams an April 28 headline on the U.S. News & World Report website.
Rising health care costs and expensive medical needs for ACA customers are expected to contribute to higher rates in 2017. So is the expiration of two federal programs designed to keep the insurance market stable in the early years of the ACA.
Over the next few months regulators will review insurers’ filings and give final approval to rates.
States Reporting So Far
So far, insurers in about 10 states have filed rate requests for 2017 with their state regulators, according to news reports. The rate filings cover ACA-ready health plans for individuals. A few examples include:
- California, where the state-run exchange, Covered California, has estimated that premiums will rise 8 percent on average.
- Florida, which has 15 insurers filing for premium increases that average 17.7 percent.
- Oregon, where 10 insurers have asked for increases that range from 14.5 percent to 32 percent.
- Virginia, with nine insurers filing for premium increases averaging about 18 percent.
Health insurers in North Carolina filed earlier this month, and those rate requests will soon become public. Blue Cross and Blue Shield of North Carolina will announce its request, which will be reviewed by the state Department of Insurance over the summer.
Last year the department approved a 32.5 percent increase for Blue Cross for individual, under-age-65 rates. Those are the rates that are in effect now through the end of the year.
Trends across the nation are certainly at play in North Carolina. Overall medical inflation — especially as prescription drug costs soar — is one factor. Another is that ACA customers tend to be less healthy and older than the health insurance population as a whole. These will impact the rate of increase that is needed — though other factors can sometimes drive differences between insurers and between states.
In 2015, medical costs for ACA customers across the nation’s Blue Cross and Blue Shield plans were 22 percent higher than costs for customers who got their coverage through their employer, according to a March report by the Blue Cross and Blue Shield Association.
Subsidies Help Consumers
Premium increases are never welcome news. Consumers eligible for a government subsidy, however, can often find ways to make health coverage fit into their household budgets. Nationally, more than eight in 10 exchange customers with ACA plans get subsidies to help pay for coverage. As the cost of premiums rise, so do the subsidies low-income consumers are eligible for. Subsidies are set based on the cost of the second-lowest-priced “Silver” plan.
Health insurance premiums largely reflect the underlying cost of medical care. (The ACA requires insurers to devote at least 80 percent of their premium revenues to covering health care. If that threshold isn’t met, insurers could be required to issue rebates to customers.)
For U.S. ACA customers, medical costs continue to be high. The Blue Cross and Blue Shield Association cites higher rates of expensive conditions such as diabetes and coronary artery disease, and a greater likelihood of seeking medical services.
Given how new the ACA is, “it’s not surprising that premium increases may be higher in 2017 as the market matures and more data become available to insurers,” says a May 5 report by the Kaiser Family Foundation.
“If insurers now losing money are able to adjust premiums to become profitable,” the report says, “the market could begin to stabilize.”