And online friends are commenting about “Obamacare premiums set to rise next year as much as 51% in some states…”
Hey, hey, hey. No need to panic. “Set to rise.” Stated as an actual set-in-stone future. See, kids, this is why I tell you not to try this at home. Being a real futurist takes a professional.
You might remember in spring of 2014 we saw headlines about how 2015 rates would “skyrocket.” And I said, “Nope.”
So what’s really happening this year? Do we each have to imagine our present rates suddenly rising by 40 or 50 percent? Here’s my reasoning.
First, these are rate hike requests, not actual rate hikes. They are not “set” at all. Think of them as opening bids by individual companies in the current round of rate adjustments, which have to pass muster in their particular states. Like any group of numbers, they fall on a bell curve. The headlines are about the extreme outliers in a few markets.
So who are these outliers?
The number of insurance companies willing to compete in each market has risen sharply year over year as the industry gets the hang of the post-ACA landscape. This was one of the big successes of the ACA, in fact: There actually is more competition. If you want more market share, you have to keep the premiums competitive. The plans are competing for market share, and trying to find their place in it. This is good for the consumer. If your plan posts a big rate hike, you can decamp to a rival.
Being the lowest cost health plan in a given market is not necessarily the happy spot, because it probably means you undershot — and those customers who shop purely on price are the least loyal, hardest to retain, and often the hardest to service. Being the low-cost health plan also means having to put together very narrow networks of doctors and hospitals willing to work for amounts you couldn’t bribe a city councilman with.
So those companies that are asking for a 40 or 50 percent hike? They are probably the ones who undershot the market before in an attempt to gain or keep market share, got clobbered, and are trying to adjust upwards for next year. In addition, they will overstate their request to get some negotiating room when they get pushback.
And there’s one more wild card: King v. Burwell. Its outcome will be known in the next few weeks, well after the health plans had to put in their rate requests for 2016. If the Supreme Court finds for the plaintiffs, there are many ways the result could play out. But for the states that let the federal government run their exchange — the states in which 6.5 million citizens now have subsidized health plans endangered by King v. Burwell — there is only one way out that would not throw both ACA and private insurance markets into complete chaos. And that way — the Republican Congress convening instantly and passing a clean one-sentence correction to the ACA, well before the 2016 sign-up season begins — is also the least likely. So some of these health plans may well be banking extreme rate requests against that chaos. If the chaos doesn’t happen, there will be no need for extreme rate hikes — and those companies won’t want them anyway, because they won’t want to price themselves out of the market.
So in the spring of last year the supposedly leaked reports that rates were set to “skyrocket” in 2015? They were publicized by some of the very same outlets that are producing the headlines with the highest shriek quotient right now.
I said it wouldn’t happen. Did it happen? Remember what actually happened? The final number, the nationwide average increase in premiums in the ACA exchanges? Zero.
Will that happen again? Who knows? There are too many factors in play in all the regions across the country, more insurance carriers plunging into more markets, some withdrawing from some markets or even getting out of the health plan business all together. But these headlines about a few outliers in a few markets are no evidence at all about the actual future. Forget it.