States and insurance companies are revealing major health insurance premium increases as they roll out rates for 2017, and a leading health-care expert says the carriers who are staying in the market have to jack up costs to compensate for the huge money lost by drastically under-pricing the product in the first place.
On Wednesday, the Wall Street Journal laid out the extent of premium hikes for individual plans both in terms of states and insurance companies.
“Market leaders that are continuing to sell coverage through HealthCare.gov or a state equivalent have been granted average premium increases of 30% or more in Alabama, Delaware, Hawaii, Kansas, Mississippi and Texas, according to information published by state regulators and on a federal site designed to highlight rate increases of 10% or more,” reported the Journal.
“In states including Arizona, Illinois, Montana, Oklahoma, Pennsylvania and Tennessee, the approved rate increases for the market leader top 50%. In New Mexico, the Blue Cross Blue Shield plan agreed to resume selling plans through the online exchanges after sitting out last year, but has been allowed to increase rates 93% on their 2015 level,” it continued.
“Dominant insurers in Connecticut, Georgia, Indiana, Kentucky, Maine, Maryland and Oregon have been allowed to raise premiums by 20% or more, and rate increases from similarly situated carriers in Colorado, Florida and Idaho are brushing up against that threshold,” the report stated.
American Enterprise Institute resident fellow James Capretta is an Obamacare critic. He says the insurance companies were left with little choice.
“It’s pretty obvious that the participants in this marketplace in 2014 and ’15 and ’16 severely under-priced their products, and so they’ve been trying to catch up. Frankly, 2016 saw fairly large premium increases, but they still haven’t priced their products to the risk profile of the people who are buying them,” Capretta told WND and Radio America.
And what exactly is this risk profile?
“Many of the people who have ended up buying these new products have ended up being fairly high users of service,” he said. “You don’t have enough of the people that are below average costs to balance out the people that are above average costs, so the premiums are going up.”
Americans were not only promised they could keep their plans and their doctors, but President Obama also guaranteed families would see their premiums decrease by an average of $2,500. Capretta said that was nowhere near realistic.
“A big part of this was a lot of wishful thinking, hoping the product would have broad appeal to consumers and, therefore, the risk profile of the people that would be buying it would be more favorable than it turned out to be,” Capretta said.
However, despite the infusion of sick people into the system not balanced by healthy people, insurance companies bailing from the exchanges and premiums and deductibles soaring, Capretta does not believe the system has hit the so-called “death spiral.”
“I think there is adverse selection going on, meaning that it is a slightly – or even more than slightly higher risk profile than they had anticipated. But that’s not the same thing as a death spiral,” Capretta said.
He notes that any family making less than four times the poverty level gets a federal subsidy, and those making less than 250 percent of the poverty level get significant subsidies. However, such subsidies are paid by the U.S. taxpayers, driving the nation’s debt higher and higher.
Capretta also notes that employer-based plans, on average, are seeing smaller increases in premiums than the individual market, ranging from five to 10 percent hikes on average.
Other experts strongly disagree with Capretta on the “death spiral.” Back in August, Aetna announced it was withdrawing from the vast majority of state exchanges it had participated in. That followed on the heels of United Healthcare doing much the same.
At the time, Galen Institute President Grace-Marie Turner said the erosion of competition and rapidly rising premiums and deductibles all add up to one inescapable conclusion.
“That really is an indication we are in the death spiral. That means you wind up with fewer and fewer healthy people in the pools and more and more sick people. When that happens, the premiums have to go up and up and up. We’re seeing that already in the requests for premium increases next year – in some cases 40, 50 or 60 percent increases,” Turner said.
And the hits just keep on coming, as the Centers for Disease Control and Prevention concluded that while more Americans have coverage as a result of the health-care law, fewer Americans have private coverage than before the law went into effect.
Capretta agrees that sets the health policy debate on a dicey course.
“The question for the United States is, do we want to move toward a fully-government run health system, or do we want to retain some element of private initiative, private marketplace and consumer preference? The more that you move toward publicly subsidized and publicly run insurance plans, the less room you’re going to have for non-regulated decision making,” he said.
And what will happen if the glaring problems with the health-care law are not addressed?
“If nothing is done, they’ll end up limping along and the exchanges will evolve over time into just subsidizing just the very lowest income people, plus the very highest-risk people,” Capretta said. “Anybody who can find insurance in other ways, especially through the employer system, will try to opt out.”
While a supporter of market-based health care, Capretta said Donald Trump has yet to offer a “coherent” plan to explain what repealing and replacing the law would look like. He suspects Hillary Clinton would seek to direct a lot more taxpayer money to insurance companies to compensate them for the highest risk patients.
And what is his solution?
“I do think there would have to be a process of trying to change how it’s operating at the moment to bring the insurers back in, impel some more competition and make the product more attractive to more customers,” Capretta said.