Why rising premiums are problematic, even with subsidies

Photo credit: Getty/MrLonelyWalker

Though the Obama administration has been adamant that subsidies will insulate most Affordable Care Act exchange customers from rising premiums, this argument may not be bulletproof.

For the federal exchange and the state exchanges that have reported data, premiums for ACA benchmark silver plans will rise an average of 22 percent in 2017--up considerably from a 7.5 percent rise last year. Federal health officials, though, have pointed out that after applicable tax credits are applied, 77 percent of current marketplace customers can get covered for $100 or less per month.

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But this leaves out the marketplace enrollees who do not receive subsidies, who will be hit especially hard by premium hikes this year. In addition, many individuals are not aware they are eligible for subsidies--including 2.5 million who buy off-exchange individual plans, the administration has said.

President Barack Obama has advocated for expanding subsidies to help more people afford coverage, yet not everyone agrees that is the answer. “Insurance companies that get more subsidies will just keep asking for more subsidies, without controlling costs,” Jamie Court, president of the left-of-center advocacy group Consumer Watchdog, told the New York Times.

Premium spikes also are a reflection of health insurers’ struggle to control costs, George Halvorson, former CEO of the Kaiser Permanente health plan, told the Times. Indeed, those difficulties led some insurers to exit the marketplace entirely or drastically scale back their participation.

And while the Obama administration has noted that subsidies increase along with premiums to shield consumers from rising costs, this ultimately means higher costs for taxpayers, the article notes. Subsidy costs are much lower than the Congressional Budget Office originally predicted, but federal spending on premium subsidies is still expected to total $672 billion over the coming decade.

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