By Sally Pipes at Forbes
Get ready to pay more for health insurance next year, compliments of Obamacare.
In nearly one-third of the 29 states that PwC investigated, premiums will rise by double digits. In Indiana, the average increase will be 15.4 percent. In Kansas, it’s 13.6 percent. Florida’s insurance commissioner says premiums are set to climb 13.2 percent.
For this latest round of premium shocks, consumers can thank Obamacare’s unwieldy mix of taxes, regulations, and mandates.
A Wall Street Journal report surmises that the most popular insurers will levy the largest rate hikes. In the 10 states the Journal examined, the largest insurer had proposed rate hikes of between 8.5 percent and 22.8 percent. Oregon’s Moda Health Plan, which accounts for three-quarters of Obamacare enrollees, is seeking a 12.5 percent boost for 2015.
All these increases in premiums come on top of 2014′s hikes. A study published by the National Bureau of Economic Research found that Obamacare has pushed premiums up by as much as 28 percent this year. A report from the Manhattan Institute put the increase at 49 percent.
So any “good” news about 2015′s premiums must take into account how much they’ve already climbed. California’s premiums, for example, are slated to climb an average of 4.2 percent in 2015. But that’s in addition to the 22 to 88 percent increases that Obamacare saddled individual buyers with this year, according to the state’s insurance commissioner.
Meanwhile, those who want to keep their current plans could be even worse off thanks to Obamacare’s Rube Goldberg-style subsidy scheme. The law distributes subsidies after taking into account a consumer’s income and the cost of a “benchmark” plan in the state. Health care consulting firm Milliman found that changes in these variables could turn a 5 percent hike in premiums into a 30-100 percent increase in costs for a consumer who sticks with his current plan.
What’s driving these price hikes? For one, the insurance pool in the exchanges is older and sicker than insurers expected. Many people who initially signed up are no longer enrolled, either because they got insurance through other means, like employment, or because they didn’t pay their premiums.
Aetna AET+1.26%, for example, reported 720,000 signups as of May 20 — numbers included in the administration’s highly touted claim of 8 million enrollees. But by the end of June, the number of paying customers for the Hartford-based insurer had declined to fewer than 600,000.
The young and healthy are most likely to drop coverage, as they may not see the value in paying premiums if they won’t have the occasion to take advantage of their policies.
That’s a problem for insurers, who need the premiums of those individuals to offset the cost of paying for treatment for older, sicker enrollees. If young people leave the pool, then insurers have to raise rates on those who remain in order to stay solvent.
Then there’s the possibility of an insurer bailout buried in Obamacare. The law’s “risk corridors” require the federal government to pay insurers if they lose too much money in the exchanges this year, next year, and in 2016.
How might they lose too much money? If the insured pool contains too many old and sick enrollees — and not enough young and healthy ones.
But even with billions of dollars’ worth of taxpayer subsidies, 43 percent of enrollees say that their Obamacare-compliant plans are difficult to afford, according to a Kaiser Family Foundation survey.
In any case, it’s all a far cry from the lower premiums the president promised. Just before signing Obamacare into law in 2010, he said it would “lower rates . . . by up to 14 percent to 20 percent over what you’re currently getting.” Employers he said, would see premiums drop $3,000 compared with where they’d be without the law.
History has proved otherwise. As long as Obamacare’s many mandates, taxes, regulations, and subsidies are in place, health insurance premiums will continue to rise.
Sally C. Pipes is President, CEO, and Taube Fellow in Health Care Studies at the Pacific Research Institute. Her latest book is The Cure for Obamacare (Encounter 2013).