Obamacare

Obamacare's Looming Premium Hikes

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Whitehouse.gov

It looks increasingly like insurance premiums for many of the most popular plans sold through Obamacare's exchanges are on track for significant hikes next year. Earlier this week, I noted reports of requests for double-digit premium hikes—in some cases more than 30 percent—in dominant plans for the states of Maryland, Oregon, and Tennessee, as well as smaller but still significant hikes in a few other states. Today, The Wall Street Journal adds another, reporting that New Mexico's biggest individual market insurer is requesting a 51.6 percent increase in premiums for the coming year.

The primary reason for all of these giant hikes is the same, according to the Journal: "high medical costs incurred by people newly enrolled under the Affordable Care Act." As noted in a previous post, Moda Health, which insures about 100,000 people Oregon, says that its costs exceeded its premium revenue by 61 percent.

This is the same story that The Washington Examiner's Philip Klein heard from insurers when he looked into the looming rate hikes as well. Now that insurers have a year's worth of claims data, they can see that the people who have signed up so far are sicker and more expensive to cover than premiums so far will support. As a spokesperson for the health insurance lobby told Klein, "This year, health plans have a full year of claims data to understand the health needs of the Exchange population, and these enrollees are generally older and often managing multiple chronic conditions." Some of this is almost certainly just public positioning for the inevitable negotiations with regulators over rates; but the consistency of the story across multiple states suggests that a fair amount of it is real. 

In any case, it goes back to what has been one of the chief worries about Obamacare for a long time—whether enough younger and healthier individuals will sign up for coverage to offset the higher costs incurred by older and sicker beneficiaries. So far, it looks like they're not, or at least not in numbers sufficient to support current premiums. And that's why it looks more and more like significant premium hikes are on the way, at least in some states, for some of the more popular plans.

It's hard to predict exactly what the impact of those hikes will be on consumers, because Obamacare's insurance subsidies, which are pegged to the price of mid-tier plans, will mean that most insurance plan members aren't personally exposed to the bulk of the increase. Even still, the few who are unsubsidized will have to pay somewhat more, and at the margins, that could mean that some people opt not to carry coverage instead. The penalty for remaining uninsured makes that harder, of course, but at a certain point, the math might still be enough to tempt some people to forego insurance coverage. The problem is that the people who do that are most likely to be the people who need it the least—the same class of younger, healthier people that Obamacare plans are already struggling to attract in sufficient numbers. And if that happens in large enough numbers, some of these plans will end up on track for a meltdown.

It's obviously far too early to reach any definitive conclusions at this point, and it's just as likely—perhaps even more likely—that plans will essentially stabilize with slightly low enrollment and somewhat higher than expected premiums. But the point is that, as with so much of Obamacare, there's an awful lot we don't yet know, and the risk for a more serious implosion is still there.

NEXT: Ronald Bailey Hangs Out WIth the Bioethicists at the BEINGS 2015 Summit

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  1. “which insures about 100,000 people Oregon, as noted previously, says that its costs exceeded its premium revenue by 61 percent.”

    I learned it from watching you, dad government!

  2. My employer decided it’d be cheaper to pay the fine than provide healthcare (and I don’t blame them). So, here I am at 51 and without any kind of health insurance for the first time in my adult life. Plus I get to pay 2% of my income (about $1200) at tax time next year. Thanks, Obama!

    1. I’ve recently found myself without health insurance as well. The irritating thing is that I can no longer purchase a catastrophic policy. Nope, it’s full service or nothing now. I’d gladly purchase a catastrophic policy until I am covered under an employer plan again (you know, as a form of actual insurance), but the numbers don’t work out for me for even the cheapest policies on the exchange.

      1. I’m not 100% sure, but I think you can still buy a catasptrophic plan, assuming any insurance companies in your state still off them, you just can’t buy it through the exchange (which means no subsidies, if you even qualify for one), and you still have to pay the penaltax because the catastophic plan doesn’t qualify under Obummercare.

        1. *offer them*

      2. As with most Leftist policies, the stupid and lazy get rewarded (with free and/or subsidized health insurance) while those of us who have tried our best to get ahead and do the right thing get punished. Seriously, what’s the point in even working or trying to be a productive citizen?

        1. Antillies — You can at least take heart in knowing that the Millennials who voted Obama into office are the ones who are going to be paying for this the rest of their lives under more and more socialist conditions. The joy in knowing that each Millennial will have to acknowledge to themselves what dumb asses they were for voting for Obama in the first place keeps me laughing to my self throughout the day. You have to love the irony!

  3. …they can see that the people who have signed up so far are sicker and more expensive to cover than premiums so far will support.

    Obviously we need an individual super mandate, in which every able-bodied young person must purchase two approved insurance policies.

    1. disability claims will soar.

      1. YOU YOUNG, ABLE-BODIED PEOPLE WANT TO MAKE IT THREE?

        1. There’s a simple fix: just send a bureaucrat around to kneecap any able bodied person who doesn’t enroll with a truncheon; then they’re no longer able-bodied and will enroll; and soon other able-bodied people will enroll, after having calculated that they’d like to keep their kneecaps.

  4. Fuck all this shit. I just want to pay my own cashy money directly to my doctor for services rendered. What’s so hard about that?

    1. The bureaucracy will lose its sip.

    2. Your betters have deemed that paying your doctor directly, like you would a dirty lawyer, is unseemly and something something FYTW.

  5. This story grows tiresome.

  6. How can this be? I was assured we had entered a glorious new era in health care. It says, right in the name, affordable.
    AFFORDABLE!

  7. Now that insurers have a year’s worth of claims data, they can see that the people who have signed up so far are sicker and more expensive to cover than premiums so far will support.

    Well, if it weren’t for all those young people wreckers and kulaks who didn’t buy plans like they were required to, then we wouldn’t be in this situation. Also, MARKIT FAILYURE!!11!!!!! OMGZ SINGLE PAYER!!1!!!!! /progtard

  8. “In any case, it goes back to what has been one of the chief worries about Obamacare for a long time?whether enough younger and healthier individuals will sign up for coverage to offset the higher costs incurred by older and sicker beneficiaries.”

    Isn’t it true that the ACA allows individuals to stay on their parent’s insurance until they are 26? Why would anyone with that option not choose it?

    This proviso might be one of the major reasons that the “young” (define as you will) are not offsetting the costs.

    1. The young largely, and correctly, view insurance as an unnecessary, expensive luxury. Young people who are generally healthy with no assets to lose in a medical catastrophe, stand to gain nothing from Obamacare. It’s likely that this is also a factor in why they don’t sign up.

      1. It’s the same reason marriage is attractive to young people. When you’re older and have 401ks and IRAs to lose…

  9. Hey, look they insured 25% of the uninsured at a cost of $72k per insured. Success!!!!

    1. But you can’t put a price on health!!! And think of the chiiiildreeeen!

      1. “And think of the chiiiildreeeen!”
        In this case they’re in their second childhood.

  10. “It’s hard to predict exactly what the impact of those hikes will be on consumers, because Obamacare’s insurance subsidies will mean that most insurance plan members aren’t personally exposed to the bulk of the increase.”

    Are the subsidies based on the costs of the second cheapest silver plan available in the state? So if the costs of that plan goes up, the subsidies don’t pick up that increase.

    1. Yep. And to add insult to injury, the second cheapest silver plan is usually pretty much complete shit.

  11. Good. Let those people who so loudly cheered and supported Obama pay the freight…Hold still Oregon…Sit tight Maryland – you’re gonna get it, get it real good.

    BOHICA

    1. If only those of us who didn’t support him have to pay it as well.

      1. Sorry, you get the government other people deserve.

  12. Wellmark is requesting a 28.7% increase in Iowa – received my notice yesterday.

  13. Waiting for Buttplug to come around and mock those of us who predicted a death spiral.

    This is what a death spiral looks like:

    the people who have signed up so far are sicker and more expensive to cover than premiums so far will support.

    Followed by:

    insurance premiums for many of the most popular plans sold through Obamacare’s exchanges are on track for significant hikes next year.

    Creating a feedback loop where more and more relatively healthy people decide the higher and higher premiums aren’t worth it and drop out.

    C’mon, Plugs! Tell us how stupid we are, and how smart Obama and Pelosi are!

    1. Unfortunately, the death spiral can’t happen as long as the insurance company bailout provisions remain intact. All’s it means is that the taxpayer will bail out the insurance companies when that day comes. It also is why premiums were low-balled. The insurance companies had a deal with Obama to keep them low until he left office. The day they neuter the bailout provisions, day +1 starts the death spiral.

  14. Democrat donor to Congessman: “Well, Tonto, it looks like we’re in trouble”
    Congressman: “What you mean ‘we’, Kemosabe?”

  15. “””The primary reason for all of these giant hikes is the same, according to the Journal: “high medical costs incurred by people newly enrolled under the Affordable Care Act.”””

    “””Some of this is almost certainly just public positioning for the inevitable negotiations with regulators over rates; but the consistency of the story across multiple states suggests that a fair amount of it is real. “””

    Not really, all the insurers went to the same health insurer convention and learned the same party line. In the old days, they used the same “high medical costs” without the ACA part (even though the increases far outpaced medical inflation). Check out their CEO salaries, record profits and bonuses. Insurers aren’t hurting.

    1. Even if that’s true the health care law is still to blame because it forces everybody to buy the products these companies are pushing. There’s no consumer choice to not do business with companies they dislike. The health insurance industry is even more of a cartel now than it was ten years ago.

      Look at auto, life, or homeowner insurance. There aren’t double digit increases in the costs of any of those every year, and yet I don’t see any of the companies that provide those policies struggling. There’s all kind of consumer choice of plans and products in those markets. Oh, and we aren’t forced to buy from them. This piece of legislation turned health insurers into utilities, completely unaccountable to the public. You don’t like what they’re doing? Tough, because you have no alternative and it’s not like the republican controlled Congress is going to act to fix this political godsend. They’ll be blaming this law’s myriad disasters on the democrats for decades to come.

      Look, this law was an abject disaster. It’s done none of the things its supporters said it would (“bend the cost curve”, cover all uninsured, reduce emergency room visits, etc) and had all sorts of bad consequences. I think we might have been better off fully socializing medicine than the bizarre creation we have had foisted upon us, and that’s saying something, because examples of socialized medicine in this country (the VA, Medicare, and Medicaid) are unaffordable, dysfunctional, or both.

  16. Suderman needs a job as PR flack for Big I, apparently.

    Hey Pete, could you tell us your thoughts on how insurers and plan operators did not benefit in any way from having no marketing expenses?

    While doing that, Pete, tell us what you know about the cost to any insurer or plan operator pre-ACA for marketing, both on new policyholders/plan participants, and on renewals?

    And tell us how the insurers and plan operators were unable to see the possible costs of insuring/covering these new, ACA-borne policyholders/plan participants.

    Thanks Pete!

  17. Isn’t that Monica Lewinsky over Obama’s right shoulder? O isn’t even able to get his own poon-tang? He has to settle for Bill’s leftovers!

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