The (Not So) Affordable Care Act – Get Ready For Some Startling...

The (Not So) Affordable Care Act – Get Ready For Some Startling Rate Increases


What will health insurance cost in 2014?

Will the new health insurance exchanges be ready on time or will the law have to be delayed?

There Will Be Sticker Shock! 

First, get ready for some startling rate increases in the individual and small group health insurance marketplace due to the changes the law dictates.In a November 2009 report, the CBO estimated that premiums in the individual market would increase 10% to 13% on account of the health insurance requirements in the ACA. In the under 50 employee small group market, the CBO estimated that premiums would increase by 1% to a decrease of just 2% compared to what they would have been without the ACA. All of these differences in premium would be before income based federal subsidies are applied to anyone’s premiums.

In recent weeks, the Obama administration issued a series of proposed regulations for the health insurance market. Since then, I conducted an informal survey of a number of insurers with substantial individual and small group business. None of the people I talked to are academics or work for a think tank. None of them are in the spin business inside the Beltway. Every one of them has the responsibility for coming up with the correct rates their companies will have to charge.

Hold onto your hat.

On average, expect a 30% to 40% increase in the baseline cost of individual health insurance to account for the new premium taxes, reinsurance costs, benefit mandate increases, and underwriting reforms. Those increases can come in the form of outright price increases or bigger deductibles and co-pays.

In states with the least mandates or for health insurance companies with the tightest underwriting now, the increase could be a lot more.But when you add the impact of the requirement that older consumers can be charged no more than three times as much as the youngest consumers (the usual standard is now a five times difference), premiums increase dramatically for the youngest. 

For example, expect individual health insurance rates for people in their 20s and early 30s to about double.

People in their late 50s and 60s might see net decreases because of the benefit they will get from the rate band compression.

Small group rates won’t increase by quite as much as for those in the individual market––a baseline increase of 10% to 20%. Small group policies won’t be as hard hit as individual policies because the underwriting reforms aren’t as big a leap in this market. But small groups with lots of young people will be hit disproportionately since each person in the group has to be rated on an individual basis and then all of those covered rolled up into an average rate. Older groups might see rate decreases.

And, the new regulations require that insurance companies have to treat their old and new business the same. Most existing business will not come under the “grandfather” rules. That means most existing individual and small group customers can expect pretty much the same thing. That will be a shock to those who already have insurance and don’t think the new law will impact them.

The health law also sets a maximum individual deductible of $2,000 for the “Silver” plan in the small group market. However, the new proposed rules gave insurance companies flexibility to make the deductible higher if they can’t reasonably price such a deductible into a plan and still hit the coverage targets (i.e. covering 70% of all medical costs in the “Silver” plan). That flexibility is there for only one reason––it’s looking more and more like the health plans will have to put higher deductibles on at least some of these plans so that they can comply with the overall cost and coverage requirements.

Come October 1, consumers will find that they will be faced with very comprehensive health plans but those plans––including the lower cost “Bronze” and “Silver” plans––will have very high deductibles. Middle class families (300% to 400% of poverty), who aren’t fortunate enough to be in employer-sponsored plans and will be eligible for only partial federal premium subsidies, will still have to pay many thousands of dollars in premiums. They will also be confronted with a choice––pay the big premiums for a plan that will cover only 60% or 70% of their health care costs, with a big upfront deductible, or pay a fine equal to 1% of their income for each adult in the family.

Consumers with incomes in excess of 400% of poverty ($46,000 single and $92,000 family of four in 2014) are going to have to pay the full cost of these health insurance policies. But consumers who make less than 400% of poverty will have their premiums capped at a percentage of their income. So, anyone getting a subsidy will be insulated from the very highest premiums. Who will pick up the rest of the premium? Federal taxpayers.

Will the Health Insurance Exchanges Be Ready On Time?
In ten months, Americans without access to employer health plans are due to be able to purchase their own health insurance on the new health insurance exchanges.

So far, only 18 states have said they will run their new insurance exchange––and that does not necessarily mean they will all be ready. The feds are required to run the exchange if the state won’t do it––20 have already said they won’t do it and five more are “partnering,” which essentially means they are leaving most of the work to the feds.

Complicating this even further, ten months out we are still waiting for the detailed rules on how those insurance exchanges are supposed to operate.

Will the feds be ready to provide an insurance exchange in all of the states that don’t have one on October 1, 2013?

I have no idea. And neither does anyone else I talk to inside the Beltway. We only hear vague reports that parts of the new federal exchange information systems are in testing.

The former CIA director couldn’t get away with an affair in this town but the Obama administration has a complete lid on just where they are on health insurance exchanges and haven’t shown any willingness to want to talk about their progress toward launching on time––except to tell us all not to worry.

We are all worried. I would not want to be responsible for the work that remains and only have ten months to do it.

The feds keep extending the states’ deadlines but there is one deadline that isn’t moving––October 1, 2013.

Another Big Date
Given the big rate increases that are coming because of the ACA and the political risk the Obama administration faces if they don’t get the exchanges up on time, I would suggest there is another big date they need to be worried about––November 4, 2014.

The Republicans said this would not work. If it does not launch on time, or does with serious problems, I would not want to be an incumbent Democrat.

I told them not to call this the “Affordable Care Act.”

Robert Laszewski has been a fixture in Washington health policy circles for the better part of three decades. He currently serves as the president of Health Policy and Strategy Associates of Alexandria, Virginia. You can read more of his thoughtful analysis of healthcare industry trends at The Health Policy and Marketplace Blog, where this post first appeared.

Leave a Reply

76 Comments on "The (Not So) Affordable Care Act – Get Ready For Some Startling Rate Increases"

Nov 7, 2014

Chemical laced products come using a variety of side effects,
so much better natural the product, greater it is actually your anatomy.

They know that most all products that you can buy are total scams.
The beauty of this approach is which you could still in order to gain and definitely
not miss a scheduled 24-hour interval. This is just the easy mechanism
of the JesExtender.


generally completes inside the month, even while.


If will not need already exactly what such a tool look like or how you
can use one, just imagine wearing a wristwatch that stretches across the
length of you. So if you to help sleep, or lounge you can wear the program.

The Proextender can be a great medical device prevented solve
your complete problems. In other words is dependable
penis better for gender?

Jan 1, 2014

It’s the best time to make some plans
for the future and it’s time to be happy. I have read this post
and if I could I desire to suggest
you few interesting things or suggestions.
Maybe you could write next articles referring to this article.
I want to read more things about it!

Jan 16, 2013

After reading through most of the comments here I realized very quickly that many of you are feeling the pain of high prescription costs and poor prescription drug benefits. While recently helping a family friend navigate through the Prescription Assistance programs offered by the major pharmaceutical companies we developed an easy to use service for other to be able to take advantage of the free medication programs that are offered. In most cases, you can receive your meds for FREE from the pharmaceutical companies. Over 4200 medications are covered under the PAP programs.I strongly encourage you to visit so you can read about the prescription drug program assistance that they offer. The folks at Redemed are a family operated organization that truly believes that you should not have chose between buying your medications and feeding your family. This is not SPAM or a scam, it’s a truly innovative approach to helping people and it works! I hope you take the time to explore your options and visit the website to see how you can save hundred if not thousands of dollars on your prescription drug costs.

Dec 27, 2012

Jonathan and Bob Hertz

Jonathan wrote::

“Joe, I don’t have time to fact check all your statements, but your statement #1 is flat out false. Broker costs are included in the AER (administrative expense ratio) not the MLR/MER. Your linked article makes that point, but you seem to have misunderstood it.”

Thanks, Jonathan for correcting yet another piece of misinformation.

Bob– Thanks for a good hypothetical.
Laszewski mentions, in passing, that of course his numbers don’t include
But most people buying insurance in the Exchanges will qualify for subsidies.
So his numbers greatly exaggerate what it will cost the vast majority of
people to buy insurance in the Exchanges. Moreover as you say, many of the policies now sold in the individual market really don’t deserve to be called insurance. They provide little protection.
IN the Exchanges, many who receive subsidies will pay less than they are currently paying for individual insurance–and wind up with a far better policy.

They will actually be insured!

Dec 24, 2012

Insurance is critical your web site has lots of excellent facts. Thanks for discussing that which you learn.I’ll bookmark your internet site

Dec 21, 2012

No one chooses to buy insurance for that percentage of aftertax income. It is insane.

Pretty soon they will offer subsidies for paying your income tax if you do not make enough. Ooops. I think they already do that. It is called welfare.

Dec 8, 2012

According to the Health Reform Subsidy Calculator, a single adult age 35 making $35,000 is expected to pay $3300 a year for health insurance, through the Exchange, which is $270 a month.

The average married couple makes $52,000 a year, but that is often with two incomes……….and their subsidies are higher too.

Dec 8, 2012

“If our hypothetical person makes an average wage”

What’s the “average” wage?

Dec 8, 2012

Having sold health insurance for several years, I can testify that there are a lot of lousy individual policies out there — cheap, maybe, but full of swiss cheese where there should be coverage. No other wealthy nation would even consider excluding maternity coverage from health insurance, as often happens in the individual market.

So we should be glad to see the individual market disrupted or even disappear.

But we must have something to replace it. That is where the exchanges and subsidies come in.

Let me create an example. Right now a person pays $400 a month for a high-deductible policy with many exclusions.

Thanks to ACA rules on guaranteed issue and benefit mandates, the premium will now go to $700 a month. This is not the fault of the insurance industry, they have to stay solvent. This is also exactly what happend in New York, New Jersey, Washington state, etc when they tried to reform the insurance market.

Enter the ACA. If our hypothetical person makes an average wage, then after subsidies his effective premium will be less than $400, plus he will have a much better policy!!

But if individual states can sabotage the exchanges or if the cost of subsidies explodes as businesses drop coverage…….then look out.

Also keep an eye out whether insurance companies themselves offer products on the exchanges — this is not a sure thing.

The ACA was ready in theory for premiums to go up. The tough part is whether it will be ready in practice.

Bill S.
Dec 7, 2012

Let’s agree to revisit this topic in two years and see what actually happens.

My hunch is that (1) the PPACA will not be a panacea for all that ails the US health care system, and (2) the doomsday scenarios of an affordability crisis will turn out to be somewhat exaggerated.

I do think that we will see more competition for individual and small group business as the underwriting changes and increased transparency for consumers kick in.

Dec 6, 2012

OK. Here is my dilemma. I retired at 50. My health care insurance costs me $16,000 a year. I have not had $16,000 of medical expenses in my life. I am sophisticated and well to do and I have no idea how to obtain a fair rate on my health insurance fees. IMHO Obama Care is my only hope.

Dec 19, 2012

Your health care coverage will be calculated by your household income. If your household income is over 99k you will still pay for your own coverage and may owe additional tax. Go to your accountant/tax preparer for hope not a polotician, they only want to get re-elected.

Dec 7, 2012

Your costs are going up even more. And your care will decline.

Sad, but true.

Dec 7, 2012

Don’t buy health insurance. Bank the $16,000 then go to India for needed health care at less than half the price.

Dec 6, 2012

This is my last comment on this thread, but I make it to show how dishonest, disingenuous, and plainly disheartening your alleged representation on either side of the aisle really is at the end of the day.

First, how hollow the democrap, er, democrat message was the economy was improving when Obama is holding out for another stimulus expense on OUR dime while demanding a tax increase, and note your buddy Dr Howard Dean says plainly taxes should be raised on ALL americans (purposely typed with a lower case ‘a’ because we are by in large small and insignificant to our alleged resentatives, er, representatives in DC). Then, we are to expect the false initial statement by Barry O back in 2009 is to be maintained to lie to such americans that health care costs will not be increased significantly with this legislation? Really, do you think true Americans with a brain do not see the handwriting on the wall with what this post proposes? God, I hate partisan hacks like the usual suspects here who just plainly lie and subterfuge with vague and nondescript “facts” and innuendos that we are all to believe. Yeah, “some” of us might benefit. Like “some” of us will live to 90 and be productive and beneficial citizens for the rest of our culture.

Don’t worry, as attentive and respectful readers have figured out, I equally hate the repugnacant, er, Republican side of the equation as well. Yeah, no new taxes on anyone, anyone who contributes to their reelection campaigns and sets them up for life after time in Congress. Take Jim Demint for instance. You think he is leaving Congress to go back to private sector work and help his constituents more personably? Sure, dream on with that interpretation! And Mitch McConell and his usual drivel? How this guy continues in office when he is so flat faced because, if he really did show emotion for one sincere moment, he would laugh and say to the public, “you think I give a damn about the american people?!” Kentucky has to be one of the stupidest states in this country, not of all the state inhabitants, but the majority, yes, I say that without hesitation!!!

And to my usual insulter who thinks he can cry foul after challenged when his insults and personal attacks finally do cross lines that any fair and reasonable commenter can read, well, guess what is reality for most people, sir? Consistency is the hallmark of success, but in your case, it equally is the hallmark of rudeness and lack of respect of others, because I have NOT said a specific word about any commenter here in my comments these past few months after being challenged by the owners of this post, and yet you do not disappoint in your ongoing rudeness directly to me.

But, by the retorts by others, I guess I illuminate my opinions of who is possibly not honest and direct by their sideswipes. Truly first class examples of why we have the representation in government these days.

I end with this, as I have said over and over since I first started commenting here over 2 years ago, this law is not going to help people as a whole, just partisan cronies, special interests, and end up hurting genuine Americans who are desperate in seeking people to represent and assist them. Here is the stat that prompted me coming here tonight in the first place, noted by Bill O’Reilly, who I watch for comedy moreso for true information, but this one I sense has possible legitimacy: 109 Million Americans work in the private sector, to support 87 million americans who are either getting public assistance significantly or fully on OUR dime, as well as more federal workers in place now since Barry O took office.

I was challenged before about my comment how we cannot survive as a culture if we have a sizeble portion of people who just want someone to do the fishing for us, yet, to all you partisan hacks who would go down with that stupid ship we have in DC right now, give us all the examples of societies past and active that not only survive, but thrive by feeding the dependency of the many on the backs of the few.

I look forward to 2 possible responses:

_____ = silence, which is plentiful when someone raises a valid point, or
more inane and vague facts and innuendos that give the illusion that a response, irregardless if not true or accurate, infers truth until people can refute the endless platitudes.

Forget if the world ends on December 21, as far as I am concerned, it ended years ago when we accepted alleged status quos, or to me, woes, that are what this culture has eroded to as of now. The internet has dumbed as down as much as enlightened us. Do you really like being on ladders just stepping up then down over and over? Oh, I forgot, that equates to reelecting the same idiots as incumbents I bet over half of you do if active voters!!!

But, you all keep believing the needs of the few outweigh the needs of the many. That is the real mantra of what is our federal, and state governments as well! Happy Holidays, yeah, right!

Dec 6, 2012

“really think you will shout and threaten us down to subservience, eh?”

By posting COMMENTS on a BLOG?

Seek help.

Dec 6, 2012

Wow, time travel really is possible:
“First, get ready for some startling rate increases in the individual and small group health insurance marketplace due to the changes the law dictates. In a November 2009 report, the CBO estimated that premiums in the individual market would increase 10% to 13% on account of the health insurance requirements in the ACA.”

The ACA wasn’t finalized until March 2010. Therefore, it would have been tough for the CBO to analyze four months earlier in November 2009–At least without some mechanism that allowed for time travel.