moodboard/iStock/Thinkstock(WASHINGTON) — The Obama administration acknowledged on Monday that premiums for its popular health care plans will rise substantially next year, another hiccup for the president’s signature law, the Affordable Care Act, also known as Obamacare.
Insurers are set to raise the premiums for plans sold through HealthCare.gov by an average 22 percent in 2017, the U.S. Department of Health and Human Services said in a report. This is approximately triple the percentage increase from 2015 to 2016, when premiums increased by 7.5 percent.
HHS Secretary Sylvia Mathews Burwell cautioned that issuers are “continuing to adapt” to a market that looks very different than it did before Obamacare, one in which they are trying to compete for costumers “based on price and quality,” and not necessarily by “finding the healthiest customers.”
Premiums are also impacted by efforts to undermine the health-care law, Burwell said in a statement Monday, including certain states’ decisions not to expand Medicaid and actions taken by a Republican-led Congress to block funding for the law.
“I encourage anyone who might need 2017 coverage to visit HealthCare.gov and check out this year’s options for yourself,” Burwell said.
While some may want to blame the health insurance companies and stockholders, there are economic and financial reasons that explain the increase.
As the industry rolls out premium increases in 2017, where will consumers feel the most pain? Here’s a look at the premium hikes and what it means for those individuals with plans created under Obamacare, and for those looking to sign up for new coverage plans:
What to Know About the Enrollment Period for 2017
The Affordable Care Act mandated that insurance companies cannot deny insurance to people with pre-existing conditions for plans in the marketplace. While this allows everyone to access health care, some patients have chronic medical conditions that are known to significantly increase the amount that insurance companies will have to pay out in claims.
The enrollment opens Nov. 1 and plans are available on HealthCare.gov and most state-run exchanges for millions of Americans. Even though average premiums on some plans will increase, HHS says that more than 70 percent of those purchasing insurance through the marketplaces are eligible to get a health plan for less than $75 a month for 2017.
To access coverage effective on Jan.1, consumers must decide on a plan in the coming weeks, and it is expected that the last day to register for a 2017 health plan is Jan. 31, 2017. For those looking for better deals while shopping for coverage, the administration recommends a low-cost plan that will often have more limited benefits. The administration also says some consumers may find lower-cost plans by switching out of their current ACA plan.
Predictions Were Wrong
When Obamacare was first implemented, many insurance companies did not have information on their new subscribers, who might not have had health insurance previously.
A 2015 report from health care consulting firm McKinsey & Company found that insurance companies lost $2.7 billion on the individual market, in part due to more claims than expected.
Complicating these forecasts is the fact that patients who are in the top 5 percent of health care spending account for 49 percent of all health care expenditures, according to the Kaiser Family Foundation. Additionally, when people with illnesses know that they will use more health care, they have a tendency to buy more comprehensive health insurance.
While the government has several programs to help redistribute insurance risk, not all companies have benefited, resulting in continued losses.
The disparity between what was predicted on costs and what the reality is for insurers means some insurers are making less money than predicted from an Obamacare program.
Insurance Companies Leaving the Marketplace
In many markets, insurance companies that currently offer money-losing plans are planning to discontinue offering those options to consumers.
UnitedHealthcare and Aetna have both signaled their intention to leave many markets. This leaves less competition. In five states — Alabama, Alaska, Oklahoma, South Carolina and Wyoming — there will be only a single company offering plans on the marketplace, according to the Kaiser Family Foundation.
The average number of insurers participating in the marketplace in states that use Healthcare.gov will be 3.9 in 2017, which is down from 2016 when there was an average of 5.4 insurers per state, according to the Kaiser Family Foundation.
A single plan on the marketplace means there is no competition between companies that could help drive down prices for consumers.
Health Care Is Expensive
The cost of medical care and drugs is high, and increasing. While increased prices for EpiPens and other drugs have grabbed headlines, overall health expenditures have grown at lower rates in recent years (around 5 percent a year) but the Kaiser Family Foundation says there’s evidence these numbers could again increase.
New medical treatments and drugs, especially for conditions like cancer, are especially pricey. As more sick people have insurance, they can get more expensive treatments that previously they could not afford or paid out of pocket. These expensive procedures can drive up premiums for the entire pool of insurance customers.
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