With health insurance companies warning that losses from their Affordable Care Act plans are unsustainable, and large carriers leaving the so-called Obamacare exchanges in many states, industry analysts are expecting that monthly premiums will rise significantly in 2017.
Not so fast, says the Obama administration.
Pushing back on recent reports predicting big rate increases next year, the Department of Health and Human Services fired off a statement on Friday reminding Florida consumers they’ve seen this movie before.
When state officials predicted an average 9.5 percent increase in monthly rates for all individual plans in 2016, the actual amount paid by Floridians receiving government aid to pay their premiums was much lower, according to HHS.
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Initial health insurance rate filings for 2017 are due to Florida’s Office of Insurance Regulation on May 11. The initial filings contain proposed premiums but do not account for the effect of rate review, consumer shopping behavior, or tax credits received by qualifying individuals.
That’s because government subsidies reduced the cost of coverage for about 91 percent of the estimated 1.7 million Floridians who selected an ACA plan for 2016. The average monthly subsidy for Floridians who received the financial aid, according to an April 12 study published by HHS, was about $302.
Consumers also saved money by shopping around for lower-priced plans, and relied on state officials to regulate premiums. Comparing the average monthly premium among Floridians who received subsidies, HHS reported that those consumers paid about $82✔ in 2015 and about $84✔ in 2016, an increase of 2 percent.
With the May 11 deadline approaching for insurance companies to file initial rate proposals for plans to be sold in Florida in 2017, HHS officials said Obamacare consumers are likely to see initial rates higher than what consumers will actually pay once the federal and state regulatory processes are completed by fall.
“Consumers’ actual health insurance premiums depend on whether they shop around for the best deal and the availability of tax credits that lower premium costs, both of which changed the picture dramatically in 2016,” said Richard Frank, HHS assistant secretary for planning and evaluation.
For consumers who buy their own health insurance but do not receive government subsidies to help pay their premiums, however, the rate hikes will be more painful, said Steven Ullmann, a health policy expert with the University of Miami School of Business.
Ullmann said that’s partly because many of the individuals who buy Obamacare plans were unable to find or afford coverage prior to the ACA. People who are generally sicker tend to buy better health insurance policies.
1.7M Number of Floridians who signed up for an Affordable Care Act plan for 2016
Indeed, insurance companies are finding that many Obamacare consumers tend to be sicker because they were previously uninsured and likely deferred care. Ullmann said insurers also have suffered because young and healthy people are still not signing up for Obamacare plans.
“If that group had been enrolling at a higher rate, then it would have distributed risk more and it would have brought down the rates for everybody,” he said. “That's still an issue.”
Another issue impacting insurer losses: Many may have priced their plans low in 2014 and 2015 to capture a greater market share.
When insurers did not receive government payments promised to them in 2010 under the so-called Risk Corridor program, which was designed to protect insurance companies against the risk of covering patients who were too sick during the first three years of the ACA exchange, the losses became unsustainable.
Ullmann emphasized, however, that the gains in coverage achieved under the ACA should ultimately benefit all Americans. A May 2015 RAND study indicated 16.9 million people, net, were newly insured under the ACA.
“It does ultimately bring down the cost of healthcare for society,” he said. “The reason being that people who now do have health insurance and therefore do have access to preventive care and to a primary care provider ... will not be utilizing the emergency room. And the emergency room is the highest cost and, if you will, lowest quality type of care because it’s not consistent.”