2017 Health Insurance Rate Hikes: Scary

2017 Health Insurance Rate Hikes: Scary

Insurer rate requests begin rolling in, and they’re downright scary. Across the U.S., insurers have filed their 2017 rate requests. Many people are asking, “Why are healthcare premiums for individual plans on the rise?”

Three factors, in particular, suggest that insurers will need rapidly accelerating premiums to sustain their Obamacare plans.

First, young adult enrollment simply hasn’t been as high as expected. Young adults are typically healthier, meaning they’re less likely to head to the doctor. Thus, the premiums paid by young adults can be used by health insurers to help offset the medical costs of treating older and sicker patients.

Secondly, in 2017 we’re going to see the risk corridor go away. To be clear, it’s not as if the risk corridor worked as expected in the first place. In 2016, insurers that were losing money on Obamacare’s exchanges requested $2.87 billion in financial assistance. Unfortunately, the risk corridor doled out just $362 million, or 13% of what was requested. This is the primary reason that more than half of Obamacare’s approved healthcare co-ops closed up shop heading into 2016. Further, without the risk corridor protecting new insurance entrants, there could be little incentive for increased competition, especially from smaller or regional players.

Finally, insurers can likely get away with big premium hikes because the vast majority of consumers enrolled through Obamacare (around 85%) receive Advanced Premium Tax Credits, which you may know better as “subsidies.” Receiving a subsidy helps shield all but about 2 million of Obamacare’s enrollees from potentially devastating hikes in their monthly payments. Of course, the other 2 million enrollees (including yours truly) could be in for some major sticker shock, as could the federal government, which is picking up the tab on these subsidies.

It’ll be interesting to see if Obamacare survives the upcoming election — Hillary Clinton has proposed building on Obamacare’s success, while Donald Trump is focused on its repeal – and if it does, what changes to the program might ensue with Barack Obama out of the Oval Office. But for the time being it’s hard to ignore that the underlying principle of the program, namely affordability, appears to be headed in the wrong direction.

Recent Posts

Leave a Comment

Contact Us

We're not around right now. But you can send us an email and we'll get back to you, asap.