Health insurers are seeking double-digit rate increases in 2016 to continue covering enrollees in the Obamacare health insurance exchanges.
They report two factors are causing the increases: Fewer-than-expected younger, healthy Americans are purchasing insurance and skyrocketing costs to treat previously uninsured older, sicker patients who are now seeking costly care for preexisting and often serious conditions.
Having now experienced the first full year of Obamacare, insurers are finding out the big-government approach to health care costs more than many of the Affordable Care Act’s (ACA) supporters initially believed was possible, says John Garen, an economics professor at the University of Kentucky.
“Health care is not free, and neither is health insurance,” Garen said. “There is no such thing as a free lunch.”
Steep Rates Hikes on Way
Not only is health insurance purchased on a government exchange far from free, it’s about to get a lot more expensive if insurers have their way, Garen says.
BlueCross BlueShield is requesting a 36 percent rate increase in Tennessee after losing $141 million in 2014 on plans it sold on the state’s government-run exchange.
Exchange market leaders in other states want even steeper rate hikes. New Mexico’s Health Care Service Corporation says it needs a 52 percent increase in order to continue offering subsidized plans.
Under Obamacare, insurers must make public any rate proposals increases of 10 percent or more on the federal government’s website. Insurers still have to go through the process of negotiating with state insurance regulators before any rates can be finalized.
Not Enough Young Enrollees
Prior to the ACA’s passage, while it was being debated, the U.S. Department of Health and Human Services (HHS) indicated the law would keep premiums down by spreading out the cost of medical care. HHS’s estimate was based on the prediction at least 40 percent of policyholders on the insurance exchanges would be between 18 and 35 years old, because this group is generally the healthiest population.
Instead, barely one-in-four purchasers in both 2014 and 2015 were in that age group. In Arizona and West Virginia, only 17 percent of policyholders are young adults.
During debate over ACA, Obamacare proponents said higher penalties for not purchasing insurance would force younger people onto the exchanges and stabilize premium rates. H&R Block reports the median penalty during 2014 for those without coverage was just $178, less than one month’s payment for individuals purchasing a bronze plan, Obamacare’s lowest coverage level.
Jim Waters ([email protected]) is president of the Bluegrass Institute, Kentucky’s free-market think tank.