Are you ready to start paying higher health insurance premiums? The Affordable Care Act, commonly referred to as Obamacare, changed the face of the American health insurance market. The law requires everyone to have health insurance, mandates coverage of pre-existing conditions, and established health insurance marketplaces offering standardized policies subsidized by the federal government. Always highly controversial, the ACA promises in 2017 to further roil the market as insurers propose large premium increases in order to continue making a profit.
The latest indication of the serious challenges facing health insurers came this week when Humana announced a small quarterly profit on individual policies, but projected a loss for the year. The company has already set up a reserve fund to cover the losses it expects in 2016.
Rate increase requests will vary by company and state, and some insurers may not need big premium increases. In fact, Centene Corp, a Medicaid-focused insurer, reports that the plans it's sold through the ACA Marketplace have been profitable so far.
Nevertheless, a lot of insurers are expected to request sizeable premium hikes. For many, actual costs have consistently exceeded their estimates, even after interim premium increases. These results show that the economics of the new health care landscape have yet to be fully understood. The instability of this market has prompted insurers to continue pursuing modifications to the ACA.
The insurance industry has had to contend with a slew of constraints. Insurers can no longer deny coverage to consumers with problematic medical histories, nor single them out for higher premiums. Before the ACA, insurers routinely excluded coverage for pre-existing conditions, even ones long since corrected.
Insurers claim that their customers are spending more on healthcare than originally predicted, in part due to greater familiarity among enrollees of the benefits they are entitled to. The general consensus is that insurers who lost money this year will ask for higher health insurance premiums in 2017. This has been borne out in two states, Virginia and Oregon, that have publicly announced insurer premium proposals for next year.
For example, the largest Marketplace insurer in Oregon, Providence Health Plan, is seeking an average premium increase of nearly 30 percent. In Virginia, Anthem has requested a 15.8 percent increase.
Regulators must evaluate each proposed premium rise, taking into account the types of plans involved. ACA Marketplace policies are standardized into bronze, silver, gold and platinum categories, representing 60, 70, 80 or 90 percent coverage, respectively.
To some extent, federal subsidies can be boosted to blunt the impact of higher premiums on low-income households. These subsidies can flow directly to insurers, insulating enrollees from higher costs. According to officials at the Department of Health and Human Services, higher subsidies have limited the impact on consumers to just a few dollars a month.
Some insurers are threatening to abandon statewide markets entirely. Humana, which sold coverage in 15 states this year, has issued a warning that it will change its offerings in 2017. UnitedHealth Group has already announced its exit from most of the 34 states it previously served, a move that may pressure regulators to approve more liberal rate increases.
Here you can find out more about the ACA in GET.com's guide to health insurance.