ObamaCare premiums expected to rise sharply amid insurer losses

By Peter Sullivan
04/25/16 06:00 AM EDT - The Hill

Health insurance companies are laying the groundwork for substantial increases in ObamaCare premiums, opening up a line of attack for Republicans in a presidential election year. 

Many insurers have been losing money on the ObamaCare marketplaces, in part because they set their premiums too low when the plans started in 2014. The companies are now expected to seek substantial price increases.

"There are absolutely some carriers that are going to have to come in with some pretty significant price hikes to make up for the underpricing that they did before,” said Sabrina Corlette, a professor at Georgetown University’s Center on Health Insurance Reforms, while noting that the final picture remains unclear. 

Insurers are already making the case for premium increases, pointing to a pool of enrollees that is smaller, sicker and costlier than they expected. 

The Blue Cross Blue Shield Association released a widely publicized report last month that said new enrollees under ObamaCare had 22 percent higher medical costs than people who received coverage through their employers.

“The industry is clearly setting the stage for bigger premium increases in 2017,” said Larry Levitt, an expert on the health law at the Kaiser Family Foundation. 

The proposals for premium increases, which will be rolled out over the next couple of months, still have to be approved by state insurance commissioners. The ultimate impact on consumers will be hard to determine, as ObamaCare’s tax credits often soften the blow. 

Still, even talk of premium increases provides an opening for Republicans who are campaigning against the Affordable Care Act (ACA) as they seek to hold their majorities in Congress and win back the White House.

“Companies are either going to have to raise their prices significantly or drop out,” said Sen. John Barrasso (R-Wyo.), pointing to a poll from NPR that found a quarter of the public says the health law has personally hurt them.

“When 25 percent of the American people say that something that the government has done has hurt them, personally hurt them, it's going to absolutely be an issue in the campaign,” Barrasso, the chairman of the Senate Republican Policy Committee, said. 

The prominence of the premium hike issue in the campaign could depend on whether Donald Trump or Ted Cruz (or someone else) is the Republican nominee.  

Trump has not put ObamaCare at the center of his campaign, and he has drawn fire from fellow Republicans on health policy for his past support of single-payer healthcare. 

Cruz, on the other hand, rose to prominence in part on his hard-line opposition to implementing the healthcare law. He seized on the news last week that the insurer UnitedHealth is dropping off of most of the ObamaCare marketplaces. 

“UnitedHealth has announced it is pulling out of the Obamacare exchanges,” Cruz wrote in a statement. “That’s the latest in a string of Obamacare failures that have led to American families losing their doctors, having few or no insurance options, and facing skyrocketing premiums and deductibles.” 

The Obama administration has sought to get out in front of the coming ObamaCare premium hikes, in part by downplaying their likely impact.

A report released by the Department of Health and Human Services this month, for example, asserted that once the law’s tax credits are factored in, the effects of  premium increases on consumers would be modest. 

ObamaCare premiums rose an average of 8 percent between 2015 and 2016, but once the tax credits were factored in, consumers on average ended up paying just 4 percent more: $106 per month compared to $102 per month. 

In an interview this month, Dr. Mandy Cohen, the chief operating officer of the Centers for Medicare and Medicaid Services (CMS), pointed to the premium review process from state regulators and the health law’s tax credits as softening the effect of proposed premium rate increases.

“Opening rates that folks file are certainly not the impact that consumers will feel, and you should take those with a big grain of salt,” Cohen said. 

Still, this year could be different. 

“In almost every year I remember since 2013 started, there were projections of double-digit premium [increases] that turned out not to be correct,” said Chris Jennings, a former Obama White House adviser on healthcare reform. “Now, do I believe this year may be a little bit different? I think it could be.”

But he said collaboration between the public and private sectors "will take care of any short term transitional issues.” 

“I really do believe that, and I believe that most health plans are in it for the long haul,” he added. 

Large premium increases were also common before ObamaCare. Back then, people could be denied coverage due to preexisting conditions, meaning some people could not obtain coverage for any price. ObamaCare premiums came in about 15 percent below expectations in the first year of the new coverage, in 2014.   

About 15 percent of ObamaCare enrollees do not receive a tax credit, so they would bear the full burden of price hikes, though they, like other enrollees, can shop around for the best deal. 

It appears likely that state regulators will be approving some hefty rate increases for next year, given the need for insurers to stop losing money.

“The market continues to react to the ACA, and we expect at least another year of increases (some well into the double digits) before rates start to stabilize,” Kevin Walters, a spokesman for Tennessee’s insurance commissioner, wrote in an email, noting that rates in the state started out on the low end but that the commissioner expects to approve some significant increases.  

Jennings, who is also an informal health adviser to Hillary Clinton’s campaign, said he is not worried by the rhetoric about premium increases.  

“The ‘sky is falling’ argument is not at all compelling,” he said. “It is predictable, but it is not compelling.”