Health industry officials say ObamaCare-related
premiums will double in some parts of the country, countering claims recently
made by the administration.
The expected rate hikes will be announced in the
coming months amid an intense election year, when control of the Senate is up
for grabs. The sticker shock would likely bolster the GOP’s prospects in
November and hamper ObamaCare insurance enrollment efforts in 2015.
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The industry complaints come less than a week
after Health and Human Services (HHS) Secretary Kathleen Sebelius sought to
downplay concerns about rising premiums in the healthcare sector. She told
lawmakers rates would increase in 2015 but grow more slowly than in the
past.
“The increases are far less significant than
what they were prior to the Affordable Care Act,” the secretary said in
testimony before the House Ways and Means Committee.
Her comment baffled insurance officials, who
said it runs counter to the industry’s consensus about next year.
“It’s pretty shortsighted because I think
everybody knows that the way the exchange has rolled out … is going to lead to
higher costs,” said one senior insurance executive who requested anonymity.
The insurance official, who hails from a
populous swing state, said his company expects to triple its rates next year on
the ObamaCare exchange.
The hikes are expected to vary substantially by
region, state and carrier.
Areas of the country with older, sicker or
smaller populations are likely to be hit hardest, while others might not see
substantial increases at all.
Several major companies have been bullish on the
healthcare law as a growth opportunity. With investors,
especially, the firms downplay the consequences of more older, sicker enrollees
in the risk pool.
Much will depend on how firms are coping with
the healthcare law’s raft of new fees and regulatory restrictions, according to
another industry official.
Some insurers initially underpriced their
policies to begin with, expecting to raise rates in the second year.
Others, especially in larger states, will
continue to hold rates low in order to remain
competitive.
After this story was published, the
administration pointed to some independent analyses that have cast doubt on
whether the current mix of enrollees will lead to premium hikes.
ObamaCare also includes several programs
designed to ease the transition and stave off premium increases. Reinsurance,
for example, will send payments to insurers to help shoulder the cost of
covering sick patients.
But
insurance officials are quick to emphasize that any
spikes would be a consequence of delays and changes in ObamaCare’s
rollout.
They point out that the administration, after a
massive public outcry, eased their policies to allow people to keep their old
health
plans. That kept some healthy
people in place, instead of making them jump into the new exchanges.
Federal health officials have also limited the
amount of money the government can spend to help
insurers cover the cost of new, sick patients.
Perhaps most important, insurers have been disappointed
that young people only make up about one-quarter of the enrollees in plans
through the insurance exchanges, according to public figures that were released
earlier this year. That ratio might change in the weeks ahead because the
administration anticipates many more people in their 20s and 30s will sign up
close to the March 31 enrollment deadline. Many insurers, however, don’t share
that optimism.
These factors will have the unintended
consequence of raising rates, sources said.
“We’re exasperated,” said the senior insurance
official. “All of these major delays on very significant portions of the law
are going to change what it’s going to cost.”
“My gut tells me that, for some people, these
increases will be significant,” said Bill Hoagland, a former executive at Cigna
and current senior vice president at the Bipartisan Policy Center.
Hoagland said Sebelius was seeking to “soften up
the American public” to the likelihood that premiums will rise, despite
promises to the contrary.
Republicans frequently highlight President
Obama’s promise on the campaign trail to enact a healthcare law that would “cut
the cost of a typical family’s premium by up to $2,500 a year.”
“They’re going to have to backpedal on that,”
said Hoagland, who called Sebelius’s comment a “pre-emptive strike.”
“This was her way of getting out in front of
it,” he added.
HHS didn’t comment for this article.
Insurers will begin the process this spring by
filing their rate proposals with state officials.
Insurance commissioners will then release the
rates sometime this summer, usually when they’re approved. Insurers could also
leak their rates earlier as a political statement.
In some states, commissioners have the authority
to deny certain rate increases, which could help prevent the most drastic
hikes.
Either way, there will be a slew of bad
headlines for the Obama administration just months before the election.
“It’s pretty bad timing,” said one insurance
official.
Other health experts say predictions about
premiums are premature.
David Cutler, who has been called an architect
of Obama-Care, said, “Health premiums increase every year, so the odds are very
good that they will increase next year as well. None of that is news.
The question is whether it will be a lot or a little. That depends
in part on how big the insurers think the exchanges will be.”
Jon Gruber, who also helped design the
Affordable Care Act, said, “The bottom line is that we just don’t know.
Premiums were rising 7 to 10 percent a year before the law. So the question is
whether we will see a continuation of that sort of single digit increase, as
Sebelius said, or whether it will be larger.”
The White House and its allies have launched a
full-court press to encourage healthy millennials to purchase coverage on the
marketplaces.
HHS announced this week that sign-ups have
exceeded 5 million, a marked increase since March 1.
White House press secretary Jay Carney on
Tuesday claimed the administration has picked up the pace considerably, saying
months ago reporters would have laughed if he “had said there would be 5
million enrollees by March 18.”
It remains unclear how many of those enrollees
lost their insurance last year because of the law’s mandates. Critics have also
raised questions about how the administration is counting people who signed up
for insurance plans.
Political operatives will be watching premium
increases this summer, most notably in states where there are contested Senate
races.
In Iowa, which hosts the first presidential
caucus in the nation and has a competitive Senate race this year, rates were
expected to rise 100 percent on the exchange and by double digits on the
larger, employer-based market, according to a February 2013 article in the
Business
Record.