Obamacare Premiums Aren’t Living Up to Doomsayers’ Predictions

Early results suggest single-digit increases, not a price apocalypse.

PASADENA, CA - NOVEMBER 19: A healthcare reform specialist helps people select insurance plans at the free Affordable Care Act (ACA) Enrollment Fair at Pasadena City College on November 19, 2013 in Pasadena, California. The event, sponsored by the Chamber of Commerce and the Los Angeles Association of Health Underwriters, offers one-on-one sessions with insurance experts certified by Covered California to help people enroll for healthcare coverage under the ACA. 
National Journal
Sam Baker
Add to Briefcase
Sam Baker
July 21, 2014, 5:46 p.m.

Obama­care’s crit­ics prom­ised the law would send in­sur­ance premi­ums skyrock­et­ing. They were wrong.

Or, if they’re not wrong, they’re at least not right yet.

Nearly 20 states have re­leased pre­lim­in­ary in­form­a­tion about premi­ums for in­sur­ance policies sold on their in­sur­ance ex­changes, and the night­mare scen­ari­os have not come to pass. In most of those states, the av­er­age in­crease across all ex­change plans is in the single di­gits.

Ac­cord­ing to a Price­wa­ter­house­Coopers ana­lys­is of 18 states’ ini­tial fil­ings, 10 states will see av­er­age premi­um in­creases of less than 10 per­cent—nom­in­al hikes in line with the stand­ard in­creases that have happened every year with or without Obama­care.

The out­liers so far are In­di­ana, with an av­er­age in­crease of 15 per­cent, and Rhode Is­land, where the av­er­age premi­um will fall by about 1 per­cent.

Ini­tial rates could still change; sev­er­al states have the power to re­view pro­posed in­creases and bar­gain for a bet­ter deal. But the early look at states’ 2015 rates helps shed some light on wheth­er Obama­care’s second year will bring steep cost hikes.

There are wild vari­ations among dif­fer­ent in­sur­ance plans. In Ore­gon alone, one plan wants to cut its premi­ums by 21 per­cent, while an­oth­er wants to raise its rates by 28 per­cent. The ex­tremes make for easy talk­ing points (“Look how much premi­ums are go­ing up!” “No, they’re go­ing down!”), but they don’t re­flect the ex­per­i­ence most people will have when it’s time to pony up for plans: The av­er­age Ore­gon in­sur­ance premi­um will rise by 2.2 per­cent.

Larry Levitt, vice pres­id­ent for spe­cial ini­ti­at­ives at the Kais­er Fam­ily Found­a­tion, said he’s sur­prised by the vari­ation in pro­posed changes but that on av­er­age, premi­ums are work­ing out to about what he ex­pec­ted: hikes of 7 per­cent to 8 per­cent in most places.

Premi­ums go up every year, and Levitt said in­creases of about 8 per­cent were to be ex­pec­ted based on rising med­ic­al spend­ing and ad­just­ments based on the first year of en­roll­ment.

In­surers had to set their 2014 premi­ums based on their best guesses about who would sign up, and they don’t have much more in­form­a­tion as they head in­to 2015.

“In­surers were fly­ing pretty blind when they put to­geth­er their 2014 premi­ums and, frankly, they’re still fly­ing pretty blind,” Levitt said.

Be­cause so many of Obama­care’s 2014 en­rollees signed up at the very end of the en­roll­ment win­dow, they haven’t filed a ton of med­ic­al claims for in­surers to work from as they try to fig­ure out how much their new cus­tom­ers will cost them.

That helps ex­plain some of the biggest changes in 2015 premi­ums—big cuts are most likely from in­surers that were es­pe­cially cau­tious about 2014 and ended up do­ing bet­ter than they ex­pec­ted, while big in­creases are most likely from plans that thought they’d end up with health­i­er cus­tom­ers than they did.

An in­flux of new in­surers is also help­ing to keep premi­um in­creases in check, ac­cord­ing to health care ana­lysts. Ma­jor in­surers, in­clud­ing United­Health­care, are en­ter­ing more states’ ex­changes next year after sit­ting on the side­lines for 2014.

What We're Following See More »
McMullin Leads in New Utah Poll
38 minutes ago

Evan McMul­lin came out on top in a Emer­son Col­lege poll of Utah with 31% of the vote. Donald Trump came in second with 27%, while Hillary Clin­ton took third with 24%. Gary John­son re­ceived 5% of the vote in the sur­vey.

Quinnipiac Has Clinton Up by 7
39 minutes ago

A new Quin­nipi­ac Uni­versity poll finds Hillary Clin­ton lead­ing Donald Trump by seven percentage points, 47%-40%. Trump’s “lead among men and white voters all but” van­ished from the uni­versity’s early Oc­to­ber poll. A new PPRI/Brook­ings sur­vey shows a much bigger lead, with Clinton up 51%-36%. And an IBD/TIPP poll leans the other way, showing a vir­tu­al dead heat, with Trump tak­ing 41% of the vote to Clin­ton’s 40% in a four-way match­up.

Trump: I’ll Accept the Results “If I Win”
1 hours ago
Duterte Throws His Lot in with China
4 hours ago

During a state visit to China, Philippine President Rodrigo Duterte "declared an end to his country’s strategic alignment with the United States and pledged cooperation with Beijing." Duterte told Chinese President Xi Jinping that he's "realigned myself in your ideological flow and maybe I will also go to Russia to talk to Putin and tell him that there are three of us against the world—China, Philippines, and Russia. It’s the only way.”

Hatch Considering 2018 Re-election Run
5 hours ago

Reports say that Orrin Hatch, who in 2012 declared that he would retire at the end of his term, is considering going back on that pledge to run for an eighth term. Hatch, who is the longest serving Republican in the Senate, is unlikely to make any official declaration until after this election cycle is completed.


Welcome to National Journal!

You are currently accessing National Journal from IP access. Please login to access this feature. If you have any questions, please contact your Dedicated Advisor.