While some politicians have seized on the news of double-digit premium hikes on the Affordable Care Act exchanges to point out the faults of the law, experts insist the issue is more nuanced.
Larry Levitt, Ph.D., senior vice president at the Kaiser Family Foundation, noted in a web briefing Tuesday that “there are really 50 different Obamacares,” referring to the range of premium changes belied by a simple across-the-board average. For example, in Phoenix, premiums are up from $207 per month to $507 per month, a 145 percent jump, while benchmark premiums will shrink about 2 percent in Cleveland, Ohio, according to the latest KFF analysis, as reported by FierceHealthPayer.
In what could prove a “pivotal” year for the exchanges, Levitt said the benefit of the premium increases is that more payers will turn a profit on their ACA business segments, therefore encouraging them to continue their participation on the exchanges.
“If enrollment continues to grow, many of the current concerns are likely to fade,” he said. The Department of Health and Human Services has predicted 9 percent enrollment growth on the exchanges during the upcoming open enrollment period.
Paul Ginsberg, Ph.D., and the Leonard D. Schaeffer chair at the Brookings Institution, told FierceHealthPayer in an interview Wednesday that the continued uncertainty of the mixture between healthy and sick people in the marketplaces is contributing to rising 2017 premiums, which were expected. Ginsberg said the trend of providers steering Medicare- and Medicare-eligible individuals toward marketplace plans also has contributed to the costly enrollee pool. Further, he said the premium hikes could draw more attention to marketplace rules, such as special enrollment periods, as means for curtailing risk.
And while adverse selection is a significant issue in any health insurance market, not just the ACA exchange markets, consumer subsidies actually reduce the prominence of adverse selection, Ginsberg added.
Cynthia Cox, an associate director at KFF, said in an email that there are two main factors to watch for regarding how premium increases impact the federal budget.
- First, how much do the benchmark plans cost?
- And secondly, how many people are signing up on the exchanges?
On the first count, Cox noted that in 2017 the rising premiums may be closer to the Congressional Budget Office's original expectations. FierceHealthPayer has reported that 2016 benchmark premiums were below CBO expectations, meaning the ACA helped trim the federal budget deficit.
On the second count, enrollment is not expected to hit levels originally estimated by the CBO this year. She concluded her email that while large rate hikes may be alarming, "it’s possible that this is just a one-time correction to bring premiums back to where they should have been," referencing the early under-pricing of exchange products.
In the KFF web briefing, Cox also noted that despite headlines emphasizing the exodus of insurers from the marketplaces, more insurers have renewed participation than have exited.
James Sung, associate director at S&P Global Insurance Ratings, told FierceHealthPayer in an interview that it's "reasonable" to believe that 2017 hikes are a one-time correction. The drop off of two of the "three Rs," risk corridors and reinsurance, are getting reflected in higher exchange product prices next year, Sung said. He added that insurers are likely to move closer to their target margins of between 2 and 5 percent, but that profitability prospects should pick up in 2019.
Donald Trump jumped on the rate hikes at an event at the National Doral Golf Club in Miami, Florida on Tuesday. “Obamacare is just blowing up,” he said, adding that “all of my employees are having a tremendous problem with Obamacare,” National Public Radio reported. But an NPR interview with the golf club’s general manager found that “more than 95 percent” of the employees receive employer-sponsored insurance and therefore will not feel any impacts of the premium volatility.
Obamacare is a disaster. Rates going through the sky - ready to explode. I will fix it. Hillary can't!#ObamacareFailed— Donald J. Trump (@realDonaldTrump) October 25, 2016
Hillary Clinton, Democratic presidential candidate, said during a radio interview Tuesday that “costs have gone up too much,” pointing to co-pays, premiums, and deductibles as areas she will fight to reduce, according to the Washington Post article. “We’re going to tackle prescription drug costs. And we can do that without ripping away the insurance that people now have,” she said.