Obamacare

Health Insurers Request Big Premium Hikes Under Obamacare—And One State Regulator is Pushing Rates Even Higher

|

Over the holiday weekend, The New York Times published a lengthy piece confirming and adding to what has been increasingly clear for months: All over the nation, health plans being offered through Obamacare's exchanges are requesting sizable rate hikes. In particular, popular plans that had attracted large customer bases by offering relatively low rates seem to be pushing for big increases next year, based on filings so far.

In Tennessee, the Times reports, BlueCross BlueShield has requested a 36 percent hike likely to affect more than 200,000 customers. In New Mexico, a plan with 33,000 members has requested a 51 percent hike. In Texas, one plan has asked for a 32 percent bump. In Oregon, the two largest plans in the state, which cover more than 220,000 people in total, have been approved for 25 and 33 percent hikes.

The Obama administration has responded by noting that so far most of these rate hike figures are just requests, and strongly hinting that regulators are likely to bargain them down. 

Here's how the Times characterizes President Obama's response: 

President Obama, on a trip to Tennessee this week, said that consumers should put pressure on state insurance regulators to scrutinize the proposed rate increases. If commissioners do their job and actively review rates, he said, "my expectation is that they'll come in significantly lower than what's being requested."

This is a plausible enough expectation on the surface. In Obamacare's initial years, regulators were able to negotiate insurers down in many instances. In at least some cases I expect that they will be able to do so once again.

Still, this year is notably different. That's because this is the first year in which insurers have a full year's worth of claims data to support their rate requests. And where these big rate hikes are concerned, what the claims data consistently shows is that the people on these plans are much sicker and much more expensive to cover than expected. A financial official for Arches Health Plan, which covers a quarter of the Obamacare exchange enrollees in Utah, tells the Times that expenses were 24 percent higher than expected when rates were set. Arches is requesting hikes averaging 45 percent next year.

This is the story all over. At one Obamacare plan in Minnesota, the Times reports, "the ratio of claims paid to premium revenues was more than 115 percent, and the company said it lost more than $135 million." A representative from Tennessee's BlueCross BlueShield plan says the plan lost $141 million "because we were not very accurate in predicting the utilization of health care." In Kansas, a Blue Cross and Blue Shield plan cover 28,000 people is requesting a 37 percent hike because the people who "purchased these individual plans since 2014 were older, in general, than expected and required more medical services than anticipated."

Regulators can attempt to bargain with insurers, but there's a limit to how much they can reasonably request when faced with claims that far exceed premiums. These sorts of losses are unsustainable over any length of time; insurers that operate at a loss for very long are likely to pull out of the market. For the plans to stay healthy, rates will eventually have to go up.

And that brings us to Oregon. As the Times reports, the state's insurance commissioner found that the cost to provide care in the state was about $830 million—$127 million more than the $703 million collected in premiums.

As a result, in two instances, the state's insurance commissioner "approved"—practically required—significantly larger hikes than what the insurers themselves requested. The state's struggling co-op plan requested a 5.3 percent increase and was approved for a 19.9 percent hike. Health Net asked for a 9 percent increase, but was approved for an average 34.8 percent bump.

The state's insurance regulator didn't bargain these insurers down. The regulator negotiated them up—warning sensibly that "inadequate rates could result in companies going out of business in the middle of the plan year, or being unable to pay claims." President Obama may have to adjust his expectations accordingly.

NEXT: Scott Walker's Anti-Gay Marriage Positions Displease His Own Family

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. I sure miss my HMO I had 6 years ago.

  2. Not just foreseeable and predicted, but right on schedule.

    Year 1 – low rates, to get market share, plus no data yet on the cost of insured pool.

    Year 2 – rate hikes all over the board, some data on insured pool, still competing for market share.

    Year 3 – plenty of data, pools have settled, and as per predictions, they are sicker/more expensive. Fuck market share, they’re losing their asses. Steep rate hikes.

    Next up: rate hikes drive off marginal/healthy customers, remaining pool is sicker and more expensive per capita, teeing up more steep rate hikes in Year 4, further erosion of the pool and concentration of risk.

    The dreaded, yet completely foreseeable death spiral is well under way. Right now. The smart insurers are now trying to line up federal subsidies of some kind; its the only way to keep rates within range and not lose their asses.

    1. My wife got a letter saying her carrier is getting out of the medical insurance business as of end of year.

      Another way to avoid losing their asses.

      1. “Risk Avoidance” is a perfectly acceptable risk management technique.

        /ARM

      2. So enough insurers will find they lose their asses and will thus pull out of the markets. BUT, people must have health insurance, what to do? *Sigh* Guess we’ll have to go single payer, we really tried to make this “free market” work.
        I’m convinced this was the long con from the beginning.

        1. This.

        2. You’re giving them too much credit for foresight. Much more likely they just keep pushing, like water flowing down a river and meeting a new beaver dam. It fills up, eventually finds a weak spot, blitzkreig!

          No planning or intelligence required.

    2. Market failyer! Single Payor now!!!!

    3. It’s a feature, not a bug.

    4. Are you saying that free market reforms don’t work?

      1. How would we know?

    5. I paid ~$300 last year for the privilege of remaining uninsured. This year I went part-time and dropped my income significantly, so I’m largely exempted from the higher penaltax. Not a day too soon, by the look of it.

      1. Gah, that sounds much better than my $300/month privilege of paying for shittier insurance than I had pre-Ocare for half the cost.

        Fuck, at my old job I used to pay $150/month for myself and my wife, and they used to deposit $500 a year into a HSA for me as long as I got a free annual health assessment (they’d come in a couple times a year and do it at work). Now I pay twice as much for a larger deductible, no HSA, and a bunch of insurance coverage that I don’t really need.

      2. Avoid the penalta by providing your tax preparer with a copy of a disconnect notice for your electricity provider. They are simple to manufacture by slow paying one month until you get on and then aying the bill. No big deal creditwise and that is considered a “life event” under O’care I hae read that makes you eempt for the penaltax.

        Check with a tax professional up to date with O’care to be sure.

    6. I expect more subsidies pumped into the system… and insurer bailouts too. More insurers will try to consolidate, limiting “market” choices. Also higher deductibles.

      1. And it won’t add one penny to the deficit /bitter laughter

        1. Lord ,not only will it not add to the deficit it is going to lower average American premimums by $2,500 per YEAR.

          Don’t hide their candle under a bushel basket.

          Let it shine.

      2. We’re already well on the way to there being only 3 major players in the game. Consolidation is already here.

    7. Next step:
      Government nationalizes the exchanges and provides terrible plans (high deductible, high co-pay, high co-insurance) to whoever wants it. A second, private insurance market emerges. You’ll have to be medically underwritten but those rates and those services will be substantially better. Unfortunately, the country will be paying for the sub-par bureaucratic nationalized system.

  3. Any of you guys remember that scene in “Casablanca” where Renault busts up Rick’s cafe based on the ostensibly shocking revelation that gambling was taking place within the cafe, and then it suddenly becomes clear that Renault has more foreknowledge than he was letting on? Good scene.

    1. Captain Renault: I’m shocked, shocked to find that gambling is going on in here!
      [a croupier hands Renault a pile of money]
      Croupier: Your winnings, sir.
      Captain Renault: [sotto voce] Oh, thank you very much.
      [aloud]
      Captain Renault: Everybody out at once!

  4. FREE MARKET REFORM OF THE HIGHEST ORDER!!!! ALL HAIL THE SUCCESS OF THIS MARKET BASED IMPROVEMENT!!!!

    /derptroll

  5. And… is it at this point that the LIVs who celebrated this bill realize why the individual mandate was an inextricable component?

    1. Nah, they will still come in here and defend it as a great and rousing success.

      1. “Look at all these people who have coverage now! It’s a success!”

        “But the prices…”

        “WHAT LA LA LA CAN’T HEAR YOU”

    2. There is a special place in hell for mealy mouthed Nazgul, the portal for which is a woodchipper.

      1. Now there’s a mixed metaphor I can live with.

    3. Nope. Will not compute.

  6. The political class in this country, like members of all political classes everywhere, are imbeciles.

    “It is hard to imagine a more stupid or more dangerous way of making decisions than by putting those decisions in the hands of people who pay no price for being wrong.” – Thomas Sowell

    I would add ‘or for lying’.

    1. Funny how accurately that applies to the police as well.

    2. I had to look that Sowell quote up to get it right. Interestingly, and on topic, I found this one as well:

      “It is amazing that people who think we cannot afford to pay for doctors, hospitals, and medication somehow think that we can afford to pay for doctors, hospitals, medication and a government bureaucracy to administer it.”

      Again, imbeciles.

      1. I remember reading about an academic “debate” on the cost of healthcare about 2008. In this context, at that time, one of the big arguments in favor of government involvement in healthcare was to prevent large corporations computerizing medical records because this would be evil.

        Having established that healthcare would be better if government ran it, one of the participating academics, quite blase, said, of course the government will have to computerize academic records because that will make things more efficient.

      2. “It is amazing that people who think we cannot afford to pay for doctors, hospitals, and medication somehow think that we can afford to pay for doctors, hospitals, medication and a government bureaucracy to administer it.”

        Again, imbeciles.

        We need the drive-by troll from the weekend likker thread to progsplain to us how gov is more efficient because no profit motive…

      3. Sowell is terrific. To those in the left, he’s an uncle Tom and ignored.

  7. Well at least we know what was in it now…

    1. Not really. The Supreme Court hasn’t finished “explaining” it yet.

  8. Well, this can’t be true. Even the Supreme Court recently ruled that intentions are what matter. The gov’t intended to make the healthcare market better and healthcare less expensive. Because: intentions.

    //sarc

    1. See Thomas Sowell quote above!

  9. I don’t understand why central planning didn’t work.

    Are the regulators racist Republicans or something?

    1. Despite being able to affect this bill in no legislative or judicial manner whatsoever, somehow the GOP is still at fault for having willed bad thoughts at it for years.

      1. If only those GOP rednecks would stop waving their Confederate flags around, I’m sure insurance premiums would drop tomorrow!

        1. LOL Ken some place’s you need }sarc tag or folk’s will think you fo real

      2. LOL, it reminds me of that scene from Kelly’s Heroes where the guys in the tank get to the bridge, finding it’s still up, but then a pair of American planes blow the bridge up. The hippy tank commander (portrayed by Donald Sutherland) glares down at the tank’s driver and tells him that it’s his fault because he sent out “negative waves”.

        1. +1 Stop it with the negative waves, Moriarty!

  10. Please repeal this horrid abomination of a law.

    1. Done.

      What? I dont have that power? Well, crap.

    2. Naw. We’re just one more SCOTUS opinion away from health insurance being a “fundamental right” that the government must guarantee to every single human being.

      Its locked in now, baby. At least until the complete fiscal and economic collapse of the US and the replacement of the current (failed?) government with something else. Worse, probably, but different. Then we’ll be rid of ObamaCare, and not before.

      1. You know who else replaced a government that collapsed fiscally?

        1. Several consecutive Spanish Habsburgs?

      2. Help us, Congress, you’re our only hope.

        Now that is a scary thought.

        1. Actually, given the vast power that ObamaCare vests in the Secretary of DHS, a whole lot could be done at the agency level, no Congress required.

          But that would require the right President to make the right appointment.

        2. Terrifying

    3. How many Republican candidates have said that they will do just that? Of those, how many are lying their asses off?

      1. All, all but two I believe.

        1. That should be a period not a comma.

    4. Repeal? Don’t you mean replace? I mean, when a surgeon removes a cancerous tumor, he’s got to replace it with something, right?

      1. GIVE ME BACK MY FREE MARKET, YOU SON OF A BITCH.

        1. And somebody deserves to be run through.

          1. Preet will be serving a subpoena momentarily.

  11. Wait, wait, wait……

    This can’t be true. According to America’s Favorite Munchkin, the insurers are lying.

    Insurers are seeking rate hikes of 20 to 40 percent for next year because they think they already have enough economic and political clout to get them.

    That’s not what they’re telling federal and state regulators, of course. They say rate increases are necessary because people enrolling in Obamacare are sicker than they expected, and they’re losing money.

    1. The problem isn’t Obamacare. The real problem is the current patchwork of state insurance regulations, insurance commissioners, and federal regulators can’t stop the tidal wave of mergers, or limit the economic and political power of the emerging giants.

      Get that? The most expansive and exhaustive overhaul of health insurance ever didn’t fix the real problems, as voiced by one of the overhaul’s own advocates. Somehow, they forgot something, which of course they have a plan to fix with single payer.

      1. I find it hard to get pissed at Reich. I definitely disagree with him on everything (AFAIK). But I think he’s a true believer rather than a liar so I have more sympathy than disgust. I save my disgust for people like Krugman.

    2. “because they think they already have enough economic and political clout to get them.”

      and that goes away in single payer. please.

    3. I can’t wait to hear all of the shit Obumblecare supporters are going to vomit up to excuse the disasters it creates, all of which they specifically denied would happen.

      I want to know where my goddamn $2500/yr savings are.

      1. I would have been pleased with static costs. As it is, my premiums climbed 50% and my deductible 100%. Oh yeah, but I got maternity coverage I don’t need or want.

      2. The Unaffordable Care Act could not have possibly been the cause of the disasters because the supporters’ intentions are pure and wonderful. Capitalists are obviously the cause because they have bad intentions. Duh. Everyone knows this.

        1. Indeed! If it weren’t for those bad intentions we could be living in the Socialist Worker’s Paradise right now!

        2. To be sure, the intentions of those who passed this godawful law were very bad. It’s not like they wanted to solve a real problem. If they did, they’d have, you know, deliberated and stuff.

      3. I want to know where my goddamn $2500/yr savings are.

        It went into a CEO’s bloated salary. If government was in charge, then you’d get your savings and more because government doesn’t waste money on profits. Duh.

        1. No, it wastes money on employee payrolls that are generally twice the size they should be because the employees don’t want to work all that hard.

    4. I don’t suppose he has any, like, evidence for this claim?

  12. The tone of Obama’s speech in Nashville was basically calling out our state insurance commissioner by telling her how to do her job. So if you pass a huge piece of legislation, and it doesn’t go as planned, just tell everyone they aren’t doing it right?

    1. That’s pretty much how he’s ran the Executive branch for the last six years.

      PRESIDENT NOT MY FAULT, REPORTING FOR DUTY.

      1. PRESIDENT NOT MY FAULT, REPORTING FOR DUTY PRESENT!

        ftfy

      2. PRESIDENT NOT MY FAULT, REPORTING FOR TEE-TIME!

    2. As when Obama told some sap that the reason his insurance rates went up is because he didn’t know how to shop the exchanges

      1. I like that excuse. They should use that one more often every time a government nationalized industry leads to higher costs, they can just tell us it would’ve been cheaper if we’d just looked harder.

  13. hey, it’s guarantee issue and modified community rating. what could go wrong.

    1. Why, nothing at all!

      /Bad actuaries

      1. That’s my band name.

      2. That’s my band name.

    2. The really grinding part about this unfolding train wreck isn’t just that it was predictable and predicted.

      Its that guaranteed issue and community rating have been tried before. And they led to death spirals before. Those predictions weren’t just an exercise in reason and logic; they were based on experience.

      But the idiots in DC and the morons who vote for them just went right ahead.

      1. The really grinding part about this unfolding train wreck isn’t just that it was predictable and predicted.
        .
        No, the really grinding part of this is that we were promised this was all going to work out just peachy if we all just thought happy thoughts about hopenchange and ignored those naysayers who used facts and figures and logic and math to explain why there is no such thing as a free lunch. So now that the trainwreck is taking place, who do you suppose is going to take the blame for depriving us of our free lunch? Don’t think for one second that anybody who believes in free lunches has had their faith in the free lunch fairy shaken, they know it’s the wreckers and the kulaks who are hoarding all the free lunches.

      2. I’d like to know how the Swiss handle their mandate penalty.

        I bet its a stiff penalty. And enforced strictly.

        But Obama knows it might hurt the bills chances so he makes it weak. Then they realize it might hit the lower middle class the hardest, so they make it easy to avoid, figuring what’s the harm?

  14. all those useless post offices could become government medical rationing waiting rooms.

    1. Perhaps we could install industrial ovens in the back to take care of the overflow?

  15. Hey, look, they covered almost 25 percent of the 44 million uninsured at a cost of $70k per insured and drove everyone’s costs through the roof. Success.

    1. Well, no. They grew Medicaid, which isn’t “insurance” or “coverage”, but welfare.

      And the growth in actual insured people pretty much matches the growth in population.

      We have just as many people as before who aren’t insured. We’ve just put more of them on welfare. That is the sum total of ObamaCare’s accomplishments.

      1. well, i’ve billed a ton of hours. so there’s that.

        1. Me too!

          ACA = Actuarial Consulting Act

  16. Per Chief Justice Humpty Roberts, these rate hikes are actually tax increases. Imagine that – private parties raising your taxes. I should have put private in scare quotes but the inevitability of Single Payer will make it obvious.

    Eventually we’ll all be in the 90% income tax bracket, except that 40% of the tax will be labelled “health care contribution” instead. Sorta like 12.8% is labelled FICA contribution even though it’s essentially a straight tax. It’s just gone – you might get a shrinking fraction of your contribution back if the government and you both live long enough. But at least the political elites and their cronies won’t face the embarrassing notion of personal financial collapse into the shame of upper middle class.

    1. “Shared Responsibility Payment”

  17. The market is acting like a … market — you Peanuts.

    Costs go up. Then prices.

    1. Which is exactly what we told you wankers would happen.

    2. No it isn’t. In a real market, people opt out if they want to at no cost.

    3. I thought this whole thing was sold under a different premise.

      I never thought “Duh! It’s markets, people: demand goes up, costs go up, price goes up” was good enough for Obamacare advocates.

      Kinda makes me wonder what their problem was in the first place, if that’s the idea.

    4. Well, the market is acting like a heavily regulated oligopoly/quasi-utility market.

      Costs go up. Then prices.

      Yeah, exactly was we predicted, and exactly as many (including, I think, you) insisted would never happen.

    5. So, the market is trying to mandate by force of law that all people purchase health insurance? And the market is imposing a bunch of unnecessary constraints on what kind of policies we are allowed to purchase to avoid a big fine? And the market is imposing that fine on people who don’t?

      I am beginning to think you have confused the word ‘market’ with ‘government.’

  18. Start making cash right now… Get more time with your family by doing jobs that only require for you to have a computer and an internet access and you can have that at your home. Start bringing up to $8596 a month. I’ve started this job and I’ve never been happier and now I am sharing it with you, so you can try it too. You can check it out here…
    http://www.jobnet10.com

  19. Uncle Ted, you’ve gotten ahold of some old talking points. With greater access to affordable, quality health insurance, the Affordable Care Act is helping individuals and strengthening our economy!

  20. What will it take? What will it take for liberals to ever declare the ACA a bad policy decision?

    1. What will it take for liberals to ever declare the ACA a bad policy decision?

      Will never, ever happen. They’re already blaming the Republicans for its failure (even though not one Republican has ever changed a single comma in the law or any regulation), and will shortly add the insurance companies to the list (even though the insurance companies supported it throughout).

      President Not-My-Fault represents his supporters very well.

    2. Obviously this is Bush’s fault.

  21. Ha! Economics is telling the politicians what idiots they are. But they’re deaf and dumb to this.

    1. Just like physics tells people who think they can fly what idiots they are. Unfortunately, unlike physics, economics allows you to defer the consequences of your action to those under your control.

  22. How can this be?

    Under progressive communism, with the right people, the right rules, the right taxes, and the right regulations, everything will be good and proper.

  23. Sorry i have to say this but it is your and my fault we voted these Slatterns in to offic

  24. Insurance commissioners weren’t keeping the premiums down before Obamacare. Why exactly are we expecting them to do so now?

    1. Barack Obama: “I will sign a universal health care bill into law by the end of my first term as president that will cover every American and cut the cost of a typical family’s premium by up to $2,500 a year.”

    2. If we weren’t expecting it to keep premiums down, then why did we do the Obamacare thing in the first place?

  25. The Insurance Mafia at it again, or still.

  26. Google pay 97$ per hour my last pay check was $8500 working 1o hours a week online. My younger brother friend has been averaging 12k for months now and he works about 22 hours a week. I cant believe how easy it was once I tried it out.
    This is wha- I do…… ?????? http://www.online-jobs9.com

  27. This article is clearly fake. We were TOLD by Obama and Nancy Pelosi that the ACA was going to REDUCE rates dramatically!!11!!11!!!!11!!1!! /End Extreme Sarcasm

  28. Google pay 97$ per hour my last pay check was $8500 working 1o hours a week online. My younger brother friend has been averaging 12k for months now and he works about 22 hours a week. I cant believe how easy it was once I tried it out.
    This is wha- I do…… ?????? http://www.online-jobs9.com

  29. Aren’t the ctual premium rates just a side show anyway? Regardless of how much they charge, didn’t the ACA also guarantee through tax transfers the insurance companies cost coverage plus?

    If costs incurred are more than premiums, then the ins. cos. are subsidize from the treasury?

Please to post comments

Comments are closed.