Speculation of the total effect of Obamacare on health insurance premiums has been reported on opposing ends of the opinion spectrum. Critics are concerned that health insurance premiums will double for many Americans. On the contrary, supporters claim that the cost of insurance increases every year, in turn, causing premiums to rise as well, but no more than usual.
It’s true, premiums in recent years have risen faster than inflation, but the overall report thus far – when taking all available information into consideration – is that large increases are likely, depending on your location and a number of other factors. This is a very different scenario than many Americans were hoping for, based on early talks of the Affordable Care Act.
In this turmoil, there are winners and losers. Some people will be paying less for healthcare because they qualify for subsidies or because their plans are already overpriced. Some will pay about the same. Still, some will pay much more, because their plan doesn’t meet the Affordable Care Act guidelines, and they must upgrade to a plan that does.
Experts have been using their due diligence to give a reasonable estimate as to what those increases will likely be. Health industry officials say some Obamacare premiums will double, contradicting the aforementioned claim made by the administration.
After some research, though, it is widely believed that the average increase in healthcare premiums across the nation will cost approximately 40 percent more than current premiums. The unfortunate truth here is that those who only see a 40 percent increase may want to thank their lucky stars that they don’t live in these states: Nevada, New Mexico, Arkansas, North Carolina and Vermont.
All five of the above-mentioned states can expect to have their premiums skyrocket between 117 and 179 percent over their current premiums. New York, Colorado, Ohio, Massachusetts and New Jersey should actually be seeing attractive drops in their rates. Some reasons as to why the unlucky states are seeing higher premium increases are highlighted below.
Increased Costs on Insurance Companies
The demands for compliance have really put insurance companies in a tough spot. Now they are being forced to offer standardized services, and they are no longer allowed to deny coverage to anyone. Calculations are in the works, but the cost of compliance is thought to cause premiums to double or even triple.
Therefore, the cost gets passed on to the consumer. A representative of Cigna confirmed that although they plan to sign up around 100,000 new members this year, they do not anticipate making any profits for the entire year. Representatives from a few of the largest insurance companies have said that they may have to opt out of Obamacare altogether.
Economic Situation
Although there are large differences by state, the average insurance premium in the United States is $328 for an individual in 2014. Many areas have an economic status that is skewed in one direction or another, so it stands to reason that this would be a factor in the average cost of healthcare per state.
So far, 80 percent of the enrollees in Obamacare have been eligible for the subsidies to help with their premiums. This makes complete sense as it seems those who get the lower rates would be faster to sign up while those forced to pay more would no doubt wait until the eleventh hour.
Aging Population
Insurers have already confirmed that the first flood of Obamacare enrollees shows a high rate of older and pricier customers than they hoped. Experts have reported that areas of the United States with older, sicker people will see the highest increases in health insurance costs, and it stands to reason these are likely the same areas with lower economic pull.
Jay Carney, White House spokesman, says that he doesn’t believe the percentage of older customers should negatively affect insurance companies, but just because it shouldn’t affect them doesn’t mean it’s not.
Marco Rubio, United States Senator, says the off-balance enrollment of the elderly is a definite failure in the system, and change is needed. Why? Because, if older (and probably sicker) people are insured, the companies insuring them must raise fees across the board to make up for the cost.
Existing Pre-Obamacare Coverage
This is a tricky one, because a person with a pre-existing condition may find that getting and paying for coverage under Obamacare is a walk in the park compared to fighting for a pre-Obamacare plan. But where does that leave the insurance companies who are forced to cover them? Once again, they have yet another reason to continue the pattern of passing on higher costs of caring for those people to other customers.
If someone has good low-cost health coverage, which is typical across certain states, they can expect a rise in premiums. Furthermore, if a patient is paying a high premium already, chances are good that Obamacare will benefit them financially. This is shown in a state like New York, where premiums will be decreasing drastically in comparison to their already expensive rates.
Some insurance companies have admittedly underpriced their policies with strategic plans to raise them in the second year. The companies will start filing rate proposals with state officials during the spring of 2014. In some states (unfortunately not all states), commissioners have the ability to deny rate increases, which may act as a buffer in protecting consumers.Rates should be released in the summer of 2014 after they’ve been approved; however, it is speculated that insurance companies may leak their rates ahead of time as a “statement.”
Bailout
A good portion of confusion lies in the area of a health insurance bailout. Here’s why: In the event that a claim costs 3 % – 8 % more than the actual premium received by the insurance company, the bailout serves to pay the difference. If the claim is over 8% of what was received in premiums, the insurance company is reimbursed for 80% of the claim overage.
So, let’s say a patient pays $10,000 for health insurance coverage. The same patient goes in for a procedure that costs $10,300. Because the difference is $300 (3%) over what the customer paid for coverage, the insurance company qualifies for a $300 reimbursement.
For these double and triple priced policies, a bailout provision is already written in the Affordable Care Act. If that’s the case, and insurance companies are aware of this, one would think they wouldn’t worry so much about the need to opt out of Obamacare or wring their hands about being forced to enroll more people. If the money is pretty much guaranteed, what’s the problem?
These “risk corridors,” as they are officially named, are only set to last until 2016, at which time it is hoped that the population will be acclimated to the changes. While this bailout plan is in place, other plans that have claims less than 3% of premiums received will be kicking into the bailout fund. So it isn’t just a situation of the healthier and wealthier paying for the poorer and sicker. It’s a situation of insurance companies funding each other’s shortcomings during the implementation stages of Obamacare.
A Little Hope
As previously mentioned, healthcare costs rise every year, system overhaul or not. However, one nugget of hope is that Obamacare shields Americans from insurance companies raising premiums for profit. They have to justify any spike in rates and even publish the reasons on their website. So, for what it’s worth, even though Obamacare regulations demand that insurance companies cover everyone, making them pass those charges on to everyone else, future rises should be much more regulated.
