OP-ED

Premium Hikes in the Exchanges: Not Good News, But Not the End of Obamacare Either

OK.  Yes, this is bad.  The Obama administration is being disingenuous if it tries to spin it any other way.   And, as has been clear for several months, this hands Hillary a “nasty” issue (pun intended). 

The “this,” of course, is the administration’s announcement on Oct. 24—after weeks of speculation and anticipation—that premiums in the exchanges will rise by an average 22% for 2017 coverage (if both state- and federally-run exchanges are included in the count.)

Despite the fact that tax subsidies will significantly soften the blow for the vast majority of people buying health insurance in the exchanges, millions of families will still be adversely affected.  

Specifically, about 2 million people who will buy coverage through the exchanges in 2017 will not get subsidies because their incomes are too high.  You could argue: hey, they can afford it.  But it’s still a pretty big hit when your monthly premium goes from $500 a month to $625.   

Less well understood and hardly mentioned in the media coverage is that some 7 million people buy “off-exchange” individual insurance.  Premiums for many if not most in this group are going to spike up, too, and from an already more expensive base.   (Off-exchange policies have to comply with ACA requirements and are for the most part comparable to policies sold on the exchanges.)

According to a blog by Katherine Hempstead posted Oct 24, the average off-exchange policy costs $314 in 2016, compared to an average $279 for an unsubsidized on-exchange silver premium.  Deductibles were higher, too, for the off-exchange policies, averaging above $3,000.   

We don’t yet know what the 2017 increases are for off-exchange coverage because no one has done that analysis.  It’s a tough analysis, too, because there are—wait for it—over 13,000 unique ACA-compliant individual market products nationwide sold off-exchange.  (Additionally, there were nearly 30,000 small group plans nationwide in 2016, of which nearly 90 percent were “off exchange” according to Hempstead’s piece.)   

To quote from her blog:  we badly need to better understand “the extent to which the individual market is appropriately priced… in both market segments.  While the federal and state exchanges….have done much to present comprehensive information to consumers about on-exchange plans, similar information has thus far been lacking for off-exchange and small group plans.”   

Despite the bad news, Republican lawmakers’ fulminations about this year’s premium hikes being the beginning-of-the-end for Obamacare are vastly overstated. 

As has been noted in most of the coverage, the range of the percentage increase varies widely from state to state.  In 10 states, for example, premium increases are 7 percent or less.  In two (Indiana and Massachusetts), premiums are actually decreasing.

Also, the states (mostly red/Republican-led) where consumers are getting hit the hardest are, predictably, those that have not expanded Medicaid and where lawmakers did nothing to create their own exchange or help get people enrolled.   

So, Republican lawmakers still opposed to the ACA in those states are being even more disingenuous than Obama administration officials—since their actions have ended up hurting their own citizens.   All for the sake of political posturing.  As a recent Kaiser Family Foundation analysis found: of the 27 million people who still don’t have health insurance in the U.S., about 5.3 million would be eligible to buy coverage through an exchange and qualify for a federal tax subsidy. 

Several million more would gain Medicaid coverage if the 19 states that have not expanded that program do so—especially Texas and Florida, which have large pockets of low income, uninsured people.    

The other reasons some exchanges are struggling have been widely discussed, including on THCB.   And ideas for fixes are starting to emerge and be debated at the state and federal level.  For example, several states are now debating taking urgent action in 2017 to create reinsurance pools to shore up their exchanges. 

See Peter Lee’s excellent Oct. 24th blog on how and why California’s exchange has succeeded to date and his advice for addressing problems in other states.  Peter runs the California exchange

The overall challenge is political, of course.  If Hillary becomes president and the Senate remains split (as expected), repealing Obamacare continues to be a legislative non-starter.  Republicans (state-level and in Congress) will then have to decide whether to work with the new administration to fix flaws in the exchanges and help millions of families….or persist in their opposition.  We can only hope sanity prevails.    

Addendum:  For a detailed portrait of predicted exchange enrollment in 2017, see ASPE’s 17-page policy brief released Oct. 19.  ASPE is HHS’ Office of Assistant Secretary for Planning and Evaluation.   

Steven Findlay is an independent healthcare journalist, policy analyst, researcher and consumer advocate.    

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PeterWilliam Palmer MDSteven FindlayBobbyGvegas Recent comment authors
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Peter
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Peter

You can’t successfully run insurance when you’ve underpriced the risk. And you can’t run sustained insurance when you hold most of the bad risk. Why are the exchanges run as their own group and not included in the larger total group of the insurance company? In single-pay there is only one group and all are required to join and spread the risk.

Obamacare is NOT a failure to the thousands receiving premium subsidies who could not get insurance before. Ask Repugs how they’re going to cover people not able to afford insurance without subsidies? Republicans are getting taxpayer subsidized health insurance.

William Palmer MD
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William Palmer MD

If we assume that the insurance actuaries are estimating these premiums correctly, then insurers are actually paying more claims (minus their 15% in administration.) Nothing in value-based payment techniques or MACRA seems to be working, so where do we go from here to bring down costs? We can’t touch Pharma or hospitals because we promised them immunity for their support of the ACA. We can lean on docs a little more to get outright skimpy, but too skimpy and costs are only delayed and amplified in later life. Nurse salaries? Are you joking? Replace nurses with techs? Already being done.… Read more »

BobbyGvegas
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Citation on my current post at my KHIT.org, quoting a New Yorker piece: “The issue is the publicly-run exchanges, where people who don’t receive health insurance through their jobs can buy plans on an individual basis… …For people who don’t qualify for subsidies, the costs of buying insurance through the exchanges can be very high. Take a family of four living in Brooklyn and making a hundred thousand dollars a year. Since their income is more than four times the federal poverty threshold, they wouldn’t qualify for any subsidies. On healthpocket.com, a Web site that lists the insurance policies offered… Read more »

Steven Findlay
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Steven Findlay

Bobby – thanks for your comment. The premium hit and the exposure to OOP costs is unacceptable for far too many families, I agree. And your mention that this family’s hit could be as high as 29% of income brings to mind the emerging consensus that no family (below a certain income threshold) should be exposed to more than 10% OOP for healthcare expenses in any one year. Hillary has proposals up this alley. I predict this issue will be a major area of discussion and debate in 2017.