Private Health Plan Rates Are Set To Spike Next YearScott Gottlieb, M.D.
(Forbes) – It isn’t just Obamacare premiums that are set to spike next year.
The rates on commercial healthplans that are sold off the Obamacare exchanges will also rise, by double digits in most states. Inflation in the health plan sector continues to grow. The latest data comes from a regular survey of commercial insurance brokers, conducted by the investment bank Morgan Stanley MS +0.00%. The survey tracks how much the annual increases built into the price of insurance are rising or falling.
President Obama famously promised that the Affordable Care Act would not only slow the growth in health care costs, but would also reverse these trends, making the average health insurance plan cheaper. That isn’t happening.
The survey measures the acceleration or deceleration in premium increases. It’s tracking by how the annual hikes in health plan rates, which we’ve all come to take for granted, are actually rising or falling from year to year.
In other words, the survey measures the rate of increase in premium increases.
For 2016, the brokers reported that average individual insurance rates would again rise, by 137 basis points. The average small group rate increases are also scheduled to rise, by 181 basis points over last year. Put another way, the average 2016 hike in individual insurance rates rose to 12.6% for 2016 from 11.2% in 2015, while the average annual increase in small group rates rose to 13.5% from 11.7% last year.
The Obama administration often points to a flattening in the cost to employers for providing health insurance as proof that Obamacare is working. But this slice of the market has the least connection to the ACA. The price of providing coverage to workers is leveling off mostly because more of the costs are being shifted to workers through high deductible health plans, rising co-pays, and cheapening coverage.
What’s happening to individual and small group plans is far more reflective of the true cost of Obamacare’s regulations since the rules directly target these markets.
The continued acceleration in premium increases comes after years of rising prices, as the cost of the new regulations got baked into the insurance plans. The inflation has become such an annual fact of life that Wall Street doesn’t track the average premium hike, but instead measures how much these increases are rising or falling.
The rise in premium hikes was lower than prior years, when the brokers reported a 341 basis point increase in the average premium hike in 2014 for individual market plans, and a 549 basis point hike for small group plans that same year. The brokers had reported even bigger increases in the increases for 2013. But the point is that at this stage in the Obamacare cycle, we were promised that rates would be falling.
Instead, the annual rise in the cost of insurance coverage continues to expand.
They’re going up inside Obamacare as well. Health care premiums will increase by an average of 7.5% in the 37 states using Healthcare.gov, the Department of Health and Human Services announced Monday. These average rate increases are calculated off the cost of the second-cheapest silver health plan sold in each market.
These “benchmark” plans are among the most hollowed out health offerings sold on the exchanges. Their costs are rising even as benefits decline. Some states will see eye-popping increases. Oklahoma is slated to get a 36% hike, and Alaska 32%.
There was a belief that many of the costly Obamacare mandates were a one-time charge that would get baked into the cost of coverage. The thinking went something like this. After health plans absorbed the cost of the new regulations, and rates spiked to reflect these charges, the inflation in premiums would begin to slow.
That’s not happening. It suggests that something far more secular is underway. Obamacare is making the market for health care less competitive.