LINCOLN, Neb.–Allan Douglas has been selling insurance since the 1980s, and as the owner of an independent insurance agency in Omaha he had a front-row view of the rollout of the Affordable Care Act.
Douglas not only helps clients navigate the health care law, commonly called Obamacare, he also had to navigate it himself because he buys his own insurance. As enrollment began in mid-November for the second year of the program, people on Obamacare plans began getting letters from their insurance companies explaining rate hikes.
Premiums Are Doubling
“Our phones are starting to light up,” said Douglas, who owns Pioneer Interstate Insurance. “Most [rates] are doubling.”
He, too, got a letter from his insurance company informing him his premium will double next year, from $594 to $1,204 per month, if he qualifies for a $260 monthly federal tax credit again.
Douglas is 50 years old and has a healthy family of six, with four children under the age of 16. He’s not sure he’ll qualify for the tax credit this year, in which case he’d pay $1,464 per month, $17,568 per year, with a $2,000 deductible. His premium and deductible would then chew up almost 20 percent of his household income.
“That’s pretty standard,” he said of his big premium increase. Douglas has shopped around for better rates on the federal insurance exchange, but he has had problems with the Healthcare.gov website crashing.
Rural Premiums Soaring
The premium hike Douglas faces is larger than the average 10 percent increase among all Obamacare plans reported by the state’s Insurance Department earlier this year. Blue Cross Blue Shield of Nebraska, the largest insurer in the state, has said its rates will go up nearly 20 percent on average in 2015.
County-by-county data released by the Obama administration show much bigger premium increases in rural Nebraska. Many counties in western Nebraska are getting hit with 17 percent hikes, counties in central Nebraska will experience 12 percent hikes on insurance premiums, and southeast Nebraska counties will see increases of 7.5 percent.
The smallest increase, 1 percent, is in Douglas and Sarpy counties, home to Omaha and its suburbs, whereas premiums in the three counties bordering Douglas and Sarpy counties will soar by 21 percent.
Obamacare Mandates Raising Prices
Matt Leonard, manager of consumer sales for Blue Cross, said the cost of care in Nebraska was lower than in much of the nation, so when Obamacare mandated “10 essential benefits” be included in all plans, premiums rose considerably.
Douglas blames the big rate increases on a lack of competition in Nebraska—only four companies sell insurance on the Obamacare exchange—and heavy use of insurance last year by people who were previously uninsured or underinsured. Those people with pent-up medical needs were “desperate” to get health insurance last year, and they likely generated big claims. So the premium hikes didn’t surprise him.
“In my opinion, it’s just not working,” he said of Obamacare. “The only thing I like is everybody can get insurance.”
Unaffordable Even With Subsidies
Even with federal subsidies, some of Douglas’ clients said they couldn’t afford to pay even the $16 per month premium they were quoted.
Lynn Alford would like health insurance but can’t afford Obamacare plans. Trained as a nurse, the 63-year-old now works as a cashier at a Lincoln grocery store. Last year she plugged her information into Healthcare.gov, but the cheapest plan she could get would cost $300 to $400 per month, with a $5,000 deductible.
She lives on Social Security, a modest pension, and about $900 per month working part-time at the grocery store. That’s not enough to afford Obamacare, she said. She pays $485 in rent for a one-bedroom apartment and drives a rusty 1993 car with a broken door.
“I’m living payday to payday,” she said.
Alford pieces together health care from free services in the community, but she wishes she could afford to go to the doctor for ailments such as colitis and periodontal disease.
“I can’t afford to go to the doctor,” she said. “It didn’t solve my problem.”
Many other young cashiers in their 20s and 30s are in the same boat, Alford said, unable to afford Obamacare plans. Even if they get a federal subsidy to lower their premiums, $5,000 deductibles are unrealistic for low-income workers, she said.
Instead of paying for Obamacare, Alford will pay the federal penalty for not having insurance: $95 or 1 percent of her income (whichever is higher), which rises to $325 or 2 percent of income next year.
“I’m just going to take my chances,” Alford said. “I’m sure there’s a lot of people like me.”
Premium Hikes to Continue
Leonard said about 87 percent of those seeking an Obamacare plan qualify for subsidies, but there are outliers like Alford.
For those frustrated by double-digit rate hikes, Leonard said it’s going to take time for prices to level off. Numerous taxes, fees, and expanded benefits drive up the cost of Obamacare plans, so people can expect these kinds of rate increases the first few years, he said.
“It’s probably going to take a few years for the dust to settle,” Leonard said. “It’s going to take a few years for the market to stabilize.”