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By Sara Hansard
June 15 — ACA premium increases will likely be substantially larger in 2017 than they were the previous two years, the Kaiser Family Foundation reported June 15.
Based on 2017 insurer requests in major cities in 13 states and the District of Columbia where complete data are available, the premium for the benchmark second-lowest-cost silver plan, which is used to calculate government premium subsidies, will increase about 10 percent in 2017, KFF said. In 2015, the benchmark premium dropped 3 percent in those markets and it increased 5 percent in 2016, KFF associate director Cynthia Cox told Bloomberg BNA June 14 before the report's release.
The findings from KFF, which has been supportive of the ACA, underscore what many have been predicting for 2017 premiums, which will become public in the heat of the presidential election (79 HCDR, 4/25/16). Insurers are requesting higher premiums to make up for the loss after 2016 of the ACA's reinsurance program to compensate plans for high claims, and to cover marketplace enrollees who have proved to be sicker than insurers originally expected.
In 2014 the average benchmark premium was $284 a month in the same markets, Cox said. That dropped to an average of about $276 a month in 2015, rose to about $285 a month in 2016 and is expected to rise to $313 a month in 2017, she said.
The 2017 premium requests don't reflect premium tax credits that 83 percent of marketplace enrollees are receiving in 2016. People earning 100 percent to 400 percent of the federal poverty level are eligible for the subsidies.
State insurance regulators still must act on 2017 premium requests, and final rates could be raised or lowered. The KFF reported that rate requests vary widely among the 13 states and the District of Columbia, from a drop of 13 percent in Rhode Island to an increase of 18 percent in Oregon.
The loss of reinsurance payments, of which insurers received more than $7.9 billion for the 2014 plan year, accounts for a large part of the 2017 increase, Cox, the lead author of the report, told Bloomberg BNA. The Centers for Medicare & Medicaid Services hasn't yet announced what the payments will be for the 2015 plan year, but it is expected to release the figures at the end of June. KFF estimated that the previous payments reduced premiums between 4 percent and 6 percent for 2016, Cox said.
In addition, “A lot of insurance companies just priced their premium too low in the past two years,” Cox said.
Some companies, such as UnitedHealth Group Inc., have largely dropped out of the marketplaces, while “others have had to raise premiums significantly to correct their pricing,” she said.
Participation in the 13 state markets and the District of Columbia is down slightly for 2017 compared with 2016 and is similar to that of 2014, the KFF report said.
Further, the 2017 premium requests reflect the first time that marketplace carriers have data for a full calendar year showing the costs of their enrollees, as opposed to partial-year data, Cox said. Open enrollment for 2017 is scheduled to begin Nov. 1 and end Jan. 31, 2017.
Cox disputed the prevalent idea that attracting more young adults to the marketplaces would substantially lower premiums. KFF estimates that about 40 percent of those who could be enrolling in the marketplaces are between 18 and 34, and 28 percent of those currently enrolled are in that age range, she said.
However, KFF estimates that if 33 percent of enrollees were in the 18-to-34-year-old age group, premiums would only be about 1 percent higher than they would be if 40 percent of marketplace enrollment was from young adults, Cox said. If 25 percent of marketplace enrollees were in that age group, premiums would be about 2.5 percent higher, she said.
Cox said the relatively large premium increases expected for 2017 may be a one-time event. Because of the end of the reinsurance program and the fact that insurers have more complete claims data, “this could be more of a market correction,” she said.
But Robert Laszewski, president of policy and marketplace consulting firm Health Policy and Strategy Associates Inc. (HPSA), told Bloomberg BNA June 14 that the ACA marketplaces have not stabilized. Only about 40 percent of people eligible for subsidies have signed up for marketplace plans, he said.
ACA plans for people with incomes above about 250 percent of the poverty level are too expensive except for those who have acute medical needs, said Laszewski, who has been critical of the ACA. A family of four with an income of about $65,000 a year would need to pay about $10,000 a year in premiums for an ACA plan, plus deductibles of about $4,000 a year, he said.
“If you could go from 40 percent of people eligible to purchase plans to a 75 percent penetration—which is the industry standard—you could reduce rates 30-40 percent,” Laszewski said.
Further, the Congressional Budget Office estimates that for 2017, both on and off the exchanges, 12 million enrollees will receive subsidies while 12 million won't, Laszewski said. “The biggest problem Obamacare has in getting prices down is attracting people to the market.”
In addition, in 2017 the ACA's health insurance fee will be suspended for one year under legislation signed into law in 2015, Laszewski said. The one-year reprieve, which will save insurers about $13.9 billion in 2017, largely offsets the loss of the reinsurance program, but the fee is scheduled to be reinstated afterward. If it is reinstated, it will raise insurers' costs and premiums, he said.
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