Many ObamaCare customers will be in for a massive shock when they see next year’s premium costs. Major insurers are publicly disclosing planned rate hikes may be 25 percent, 30 percent and even 50 percent higher in 2016 than this year. Yikes!
With a full year of medical claims under their belts, medical insurers now have a fuller picture of the medical needs of newly insured ObamaCare patients. As we predicted, they skew older and sicker and thus require more services and more expensive medicine. And remember, insurers have to offer the same rates to customers, regardless of their health conditions, and they can’t deny coverage. No surprise, insurers want to pass those costs along to customers.
Health Care Service Corp. in New Mexico is asking for an average increase of 51.6 percent in premiums. Tennessee’s BlueCross BlueShield of Tennessee is proposing a 30.4 percent increase and Oregon’s Moda Health wants to boost average premiums by about 25 percent. These are sizeable increases.
ObamaCare requires that insurers file proposed rates with local regulators and the federal government. Insurance regulators in many states can force insurers to scale back requests they can’t justify. That means the insurers have to eat those added costs. The Obama Administration can also ask insurers who want to bump rates more than 10 percent to explain why but can’t require them to cut rates.
Not every state will see such whopping increases. Washington state and Vermont insurers are asking for modest increases of 9.6 percent and 8.4 percent, respectively, which are in line with last year’s increases. Michigan’s Blue Care Network is applying for a 10 percent increase and Anthem Inc. in Virginia, wants an average increase of 13.2 percent.
The Wall Street Journal reports:
“This year, health plans have a full year of claims data to understand the health needs of the [health insurance] exchange population, and these enrollees are generally older and often managing multiple chronic conditions,” said Clare Krusing, a spokeswoman for America’s Health Insurance Plans, an industry group. “Premiums reflect the rising cost of providing care to individuals and families, and the explosion in prescription and specialty drug prices is a significant factor.”
David Axene, a fellow at the Society of Actuaries, said some insurers were trying to catch up with the impact of drugs such as Sovaldi, a pricey pill that is first in a new generation of hepatitis C therapies.
BlueCross BlueShield of Tennessee, CareFirst in Maryland and Moda in Oregon all said high medical claims from plans they sold over insurance exchanges spurred their rate-increase requests.
The Tennessee insurer said it lost $141 million from exchange-sold plans, stemming largely from a small number of sick enrollees. “Our filing is planned to allow us to operate on at least a break-even basis for these plans, meaning that the rate would cover only medical services and expenses—with no profit margin for 2016,” said spokeswoman Mary Danielson. The plan’s lowest monthly premium for a midrange, or “silver,” plan for a 40-year-old nonsmoker in Nashville would rise to $287 in 2016 from $220.
Tennessee Insurance Commissioner Julie Mix McPeak said she would be “surprised if we settled on 36.3%” as requested for the Blue plans’ average rate increase, but a significant boost might be allowed. She said data her team examined reflected big medical-claim costs.
CareFirst said its monthly claims per member nearly doubled to $391 in 2014 from $197 the year before. Its monthly premium for a 40-year-old nonsmoker in Annapolis with a silver plan would rise to $306 in 2016 from $244.
Insurance premiums are a key measure to assess the performance of ObamaCare. When insurance premiums jumped for younger Americans groups as ObamaCare rolled out, it became painfully public that ObamaCare is a system which penalizes young, healthy Americans by forcing us to cover the costs of older, sicker Americans.
For 2015, insurers didn’t bump their rates as they had little information about the health of new costumers so the asked for more modest increases of around 10 percent or less. Next year and going forward will be another story.
Perhaps, the big question now is how ObamaCare customers will pay for the higher premiums. Will their taxpayer-funded subsidies be adjusted higher to pay for the higher costs? If not, will they shop for plans with lower premiums but higher deductibles, will they find a way to pay for the higher premiums out of their own pockets or will they drop of out ObamaCare entirely.
Of course, this is based on the assumption that the federal marketplace subsidies will still be around. As we know, the Supreme Court is set to decide whether those Americans who secured subsided through the federal marketplace instead of the states with exchanges, can keep those subsidies.
The ObamaCare saga is a never ending story of how government engineering “solutions” to problems create bigger problems by tampering with the private marketplace causing more headache than help and trigger unintended consequences.