Obamacare Premiums May Double: Are Insurers in Trouble?

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

Get ready for health insurance premiums to double.

That's the verdict from Elise Verbeck at The Hill, a prominent political website. She reported recently that health industry officials project that parts of the country will see their premiums shoot up by 100%, especially areas with higher numbers of elderly and sicker residents.

If these predictions prove to be accurate, many Americans could be hit hard financially. But will the health insurers leaking the gloomy forecasts be in trouble themselves?

Source: Wikimedia Commons 

Double, double
Although The Hill's story referred to anonymous sources, at least one health insurance insider has gone on the record that some rates will skyrocket. In December, Aetna (NYSE: AET  ) CEO Mark Bertolini stated in an interview with CNBC that some people would likely pay twice as much with the Affordable Care Act, commonly referred to as Obamacare. 

While health insurance premiums have risen steadily in the past, there are several reasons why the increases could be even steeper in the future. At least one stems directly from the way Obamacare was constructed. Insurers receive federal subsidies in the form of reinsurance and risk corridor payments if their losses are too high -- but only in the first three years of the health reform legislation. That could be an incentive for the companies to price premiums lower during year one but increase rates later.

Insurance industry officials say that the biggest reason for soaring premiums in 2015, though, stems primarily from Obamacare's early website woes and continuing changes to how the law is being implemented. A particularly significant change was the Obama Administration decision to allow individuals whose previous health insurance had been canceled to keep their old plans. This 180-degree turn sparked an outcry from health insurers that had established rates assuming those individuals would buy insurance meeting all of Obamacare's more stringent requirements.

Toil and trouble?
Does the exasperation and frustration of health insurers mean that they could face financial troubles in the days ahead? Probably not.

Those reinsurance and risk corridor payments from the federal government provide a safety net for the first three years. Insurers might lose money on their individual insurance products, but the losses won't be catastrophic thanks to Obamacare's cushion.

Humana (NYSE: HUM  ) , for instance, stated that it expects to lose money on its Obamacare plans and receive between $250 million and $450 million to offset those losses. Still, the big insurer stuck by its 2014 earnings outlook of $7.25 to $7.75 per share, which means at least $1.1 billion in profits. That's not a figure likely to cause despair.

For some health insurance companies, losing money in the individual insurance market amounts to barely a blip in the big picture. Cigna (NYSE: CI  ) is a prime example. The company's management commented that they don't see the launch of Obamacare as a "watershed moment"-- mainly because individual insurance doesn't make up a large amount of Cigna's business.

Aetna CEO Mark Bertolini. Source: Wikimedia Commons 

Remember also that many insurers always have an alternative just in case the individual market proves too unattractive under Obamacare. Aetna's Bertolini said that pulling out of Obamacare "is an option that we will pursue if we need to if the program doesn't settle down." He was clear that this was a last resort, but that Aetna could make the decision on a state-by-state basis. 

Fire burn and cauldron bubble
Perhaps the surge in premiums won't happen at all. The White House disputes that premise that rate increases will be greater than in the past.

Health and Human Services Secretary Kathleen Sebelius told the House Ways and Means Committee that increases will be "far less significant than what they were prior to the Affordable Care Act." Following the story reported by The Hill, federal officials cited independent studies that question whether premiums will actually increase significantly.

Which perspective is more credible -- that of Sebelius or of health insurance industry insiders like Bertolini? Take your pick. Either way, there doesn't appear to be any reason for investors holding positions in health insurance stocks to fret over the prospects of Obamacare premiums doubling. For those Americans with individual health insurance, worries might be harder to hold back.

The specter of skyrocketing premiums appears to be an issue that will brew for several more months. Insurers have to submit their 2015 rates in late spring.

Your potion for profiting under Obamacare
Obamacare might seem murky, but it doesn't have to be. In only minutes, you can learn the critical facts you need to know in a special free report called "Everything You Need to Know About Obamacare." This FREE guide contains the key information and money-making advice that every American must know. Please click here to access your free copy.

Read/Post Comments (33) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 23, 2014, at 5:27 PM, stephenjMES wrote:

    Seriously mind boggling how on average the demorrats are thee twice as wealthy as their counterparts and they can't even do grade school math. And don't get started on how much lack of common sense escapes them!!!!!!!!

  • Report this Comment On March 23, 2014, at 6:59 PM, kthor wrote:

    but but obama said it should be cheaper? LOL fools!

  • Report this Comment On March 24, 2014, at 2:03 AM, ManoftheRepublic wrote:

    The White disputes...... That would be the same White House that said that you would SAVE $2,500 per year and the same White House that said that If you like your plan you can keep it.. And the same White House........

  • Report this Comment On March 24, 2014, at 10:51 AM, JIMFITZSR wrote:

    Under the Republicans’ proposal, what would happen to someone who was made eligible for Medicaid because of Obamacare’s Medicaid expansion, or someone who gets the most lavish taxpayer-funded Obamacare subsidies because he or she has an income that’s just above the Medicaid line?

    Under Priebus’s proposals, the answer would be: They’d get very little or nothing — an answer that almost certainly won’t lead to full repeal.

    Senator Ted Cruz of Texas took aim at the tax

    credits in a August 2013 interview with conservative radio host RushLimbaugh. He likened the subsidies to a sugar addiction, a tool for President Barack Obama to ensure that the American people would never support a repeal of the healthcare law.

  • Report this Comment On March 24, 2014, at 1:19 PM, markopard wrote:

    Subject: Where did the White man Go Wrong

    Indian Chief "Two Eagles" was asked by a white government official, "You have observed the white man for 90 years. You've seen his wars and his technological advances. You've seen his progress, and the damage he's done."

    The Chief nodded in agreement.

    The official continued, "Considering all these events, in your opinion, where did the white man go wrong?"

    The Chief stared at the government official for over a minute and then calmly replied. "When white man find land, Indians running it, no taxes, no debt, plenty buffalo, plenty beaver, clean water. Women did all the work, Medicine man free. Indian man spend all day hunting and fishing; all night having sex."

    Then the chief leaned back and smiled. "Only white man dumb enough to think he improve system like that."

  • Report this Comment On March 24, 2014, at 1:32 PM, smilingdon wrote:

    Give the three nitwits of the east (Obama, Pelosi and Reid) the bills. They wanted it past so bad without knowing what was in it and in a backdoor way, they deserve nothing less that to be taken out of office!

    What is going to become of us?

    Bail out insurance companies will be coming up soon.

  • Report this Comment On March 24, 2014, at 3:04 PM, spankleelee wrote:

    I don't consider any media that blatantly lies as being a "prominent political website". Because Twice already, people have received refund checks from insurance companies that were over charging on purpose. And 2015, more refunds will be issued. Let's get real here people. Corporations have until 2018 to convince us it's bad. We should all know by now that what is good for us is not what they want. They will be taxed. You see all that money they keep sucking from us will go into paying for health care instead of investor pockets. Wake up!

  • Report this Comment On March 24, 2014, at 5:09 PM, CommieLibNot wrote:

    The ACA at a glance:

    - A lot of layoffs and hourly reductions are coming

    - Higher premiums

    - Tripled deductables making everything out-of-pocket

    - Important drugs and procedures are not covered

    - Good doctors retiring and others not accepting ACA

    - Big Cutbacks in ACA benefits is coming - its broke

    - The ACA - The Next Big Liberal Bailout


  • Report this Comment On March 24, 2014, at 5:45 PM, mark636 wrote:

    I have to buy my own insurance and my Obama rate tripled.

    I know get to pay for every fat lazy democrat as well as mine

  • Report this Comment On March 24, 2014, at 8:24 PM, squirl033 wrote:

    why am i not surprised? Owebama been lyin' to us all along, this is just the tip of the iceberg. if something isn't done, the REAL healthcare crisis will come when the millions of previously insured citizens suddenly can no longer afford health insurance, and stop paying for it... ironic, isn't it, that Owebama's signature law might well completely backfire, leaving far more people uninsured than there were in the first place??? Owebama is gonna sink this country if he isn't stopped... and the only viable way to do that is to vote out all the moron liberals who supported this law in the first place, then repeal it and start over.

  • Report this Comment On March 24, 2014, at 8:35 PM, JimWherry1 wrote:

    Insurers are NOT in trouble. Supporters of the ACA are. This will only spiral out of control, year after year. The President could not or would not build consensus in support of the bill and people Do resent it.

  • Report this Comment On March 24, 2014, at 8:49 PM, MaxSlugger123 wrote:

    OK Liberal America. You wanted this. You begged for this. You shoved it down the throats of people who didn't want it. Its your Dog Food. Eat it. NO EXCUSES. THIS NEED TO BE IMPLEMENTED NOW. I Hope you choke

  • Report this Comment On March 24, 2014, at 9:16 PM, thegodfather4u wrote:

    Norman Mattoon Thomas, a six time candidate for the U.S. Presidency under the "Communist Workers Party of America" said that he no longer had to seek high office because the Democrat Party had adopted their platform, & that the American people would never knowingly or willingly accept Communism they would do so under the guise of "Freedom & Democracy". He said that in 1943.

  • Report this Comment On March 24, 2014, at 9:49 PM, Michaellaborde wrote:

    Obamacare was designed to fail, this way a one payer system , the government , would take control of you healthcare . Anyone who wouldn't toe the powers that be line , would , well lets just say that it wouldn't go well with them.

  • Report this Comment On March 24, 2014, at 9:53 PM, SLTom992 wrote:

    Obama-care was designed from the beginning to make this a two tier economy - the rich (like Obama) and the poor. The middle class was designed to be driven into the ground. Thank you local Congressmember.

    Saying things like that got me thrown off of the Huffington Post site.

  • Report this Comment On March 25, 2014, at 12:18 AM, DudleyDoRight wrote:

    Obamacare simplified - - -

    Obamacare --- To insure the uninsured we first make the insured uninsured and then make them pay more to be insured again so the original uninsured can be insured for free.

  • Report this Comment On March 25, 2014, at 12:22 AM, DudleyDoRight wrote:

    A "Liberal Paradise" would be a place where everybody has guaranteed employment, free comprehensive healthcare, free education, free food, free housing, free clothing, free utilities, and only Law Enforcement has guns.

    And believe it or not, such a place does indeed exist …… It's called prison.

  • Report this Comment On March 25, 2014, at 12:25 AM, DudleyDoRight wrote:

    "The problem with socialism is that eventually you run out of other people's money" ~Margaret Thatcher~ vote Democrat for 50 years.....then you reap what you sow

  • Report this Comment On March 25, 2014, at 1:06 AM, DevonShire123 wrote:

    Lemme get this straight--prices are going up on people, and somehow that's going to hurt the companies taking that money and putting it in their pockets?

    I smell another bailout. "Save the poor insurance companies! With your tax dollars!" Stupid, duped America.

  • Report this Comment On March 25, 2014, at 2:20 AM, JRCQ wrote:

    Whoever really thought that the for-profit insurance companies will go along with the Obamacare if they believe they'll go belly up? The ACA law provision for 3-yr loss reimbursement guarantees them an almost risk-free deal. So starting the 4th yr (2017) when the gov't (or taxpayer) reinsurance is gone, that's when we'll see what the premium would really look like. And by then, Obama has left the building.

  • Report this Comment On March 25, 2014, at 2:44 AM, lyndagroom wrote:

    The fact is that the insurance companies may indeed have to raise their rates, and then again they may not. We won't know until next year. At this time all of this speculation is just noise.

  • Report this Comment On March 25, 2014, at 5:24 AM, RrroseSelavy wrote:

    Speculation is all the naysayers have to go by outside of false testimonials on TV etc. Everything is about fear to see the plan fall flat on its face. I find it amazing that those on the right who want to blame the ACA for everything under the sun somehow forget how outrageously expensive the American medical system became, to the point that an aspirin in a hospital can cost $20 or a band aid $35. They want the usual phony free market solution: just let it work itself out, like after the next Great Depression strikes. Then we'll have a self correction.

  • Report this Comment On March 25, 2014, at 5:51 AM, cwindom wrote:

    the secret to success in this country....have a few kids and both you nd your significant other need to quit your jobs and do everything you can to be as unproductive as humanly possibly be. the less you contribute to society the higher the reward you get from the government. They will make sure you both get a paycheck twice a month, give you $700 or $800 a month to pay for your groceries and make sure that both parents and all the kids are covered. The kids can get their school lunches free. You do not a have to remain drug free because there is no risk of losing your job from a failed drug test. And to keep the benefits rolling in just lie and tell the government that you are trying so hard to get a job but no one is hiring, while you sit there and pretend like there are not thousands of job postings all over the internet on sites like creaigslist, careerbuilder, snag a job etc.. Why be an idiot and work for less than what the government will give you for free. And if you can get enough people to join you in your way of life, when its time for the benefits to end, Obama will just do everything in his power to get them extended....... ..Or you can be an idiot and work your ass off. If you do that, you might not be able to afford insurance but if you can you probably will not be able to afford the deductible that you have to pay before the insurance kicks in, you might get fined because you cant afford that insurance you might have to live off of Rammen Noodles and hot dogs, you might be broke all the time because of the hundreds of dollars a week you have to spend on child care so someone can watch your kids while you go to work but atleast at night you can go to sleep knowing that you work your ass off so the government can afford to take care of the less-productive members of society and that's all that matters right.......Crimea had the right idea, can we vote on if we want to remain a part of this country?? because I do not think I do, unless something changes and quick

  • Report this Comment On March 25, 2014, at 6:04 AM, rickshelton53 wrote:

    Now listen Mr Obama told Americans right to their faces this way would be cheaper on all the people who doesn't have coverage ,, ,,Now lets look back, If a person even though he's the president tells the people a lie ,,Is that considered to be ,,the way of the new world or is this nothing but the NORM ,, B4 Obama speaks to the public do we think he sears on the bible that he is telling us the truth.

    Or does the man say to himself i'm going to lie today to millions

  • Report this Comment On March 25, 2014, at 7:46 AM, r95252 wrote:

    How can you trust a chronic liar, or any liar? The democrats only know how to lie to stay in office. It's time to send them packing, and for some, that means arrested for treason!

  • Report this Comment On March 25, 2014, at 8:26 AM, jolo wrote:

    put Obamacare in the trash with him. all a bunch of off the wall garbage anyone with any Intelligence would never even try to slip this b/s through as law. 3 more years of this we can't wait 3 years for change this man has done so much damage while all in Washington dc has let him do so it would take Bill Clinton to fix this mess.

    all these other so called candidates for president is a total joke!

  • Report this Comment On March 25, 2014, at 8:38 AM, erini wrote:

    Health Insurance Corporations, this is what we should call: THE DEATH PANELS!

  • Report this Comment On March 25, 2014, at 8:40 AM, blankcheck456 wrote:

    If the insurance companies are in trouble because now they actually have to pay for the healthcare of their clients instead of dumping them what does that say about our failed healthcare system. I know that the GOP is fighting hard to go back to our old system described by many as "the healthcare crisis"

    Juts a note to all you republicans who hate Obamacare...if you win and we go back to the old "healthcare crisis" where insurance companies dump people as as soon as they get to sick to work, you will own that system. It will be the republicans fault every time someone gets thrown into bankruptcy or dies because of it. I thought Obama was crazy to run when the banks were failing, the GOP made sure he owned that mess. Do you really want to own "the healthcare crisis"? 3 hard working people on my block alone were dumped by insurance companies when they got cancer. Most countries take care of their citizens healthcare one way or another, America has the least efficient most expensive healthcare system in the world, are you sure that you want to own that?

  • Report this Comment On March 25, 2014, at 9:31 AM, sogole wrote:

    How can our own government force its citizens to buy something they do not have the money to pay for?

  • Report this Comment On March 25, 2014, at 10:26 AM, lightnin001 wrote:

    Nope, but Democrat politicians who voted for it or have supported it sure are!

  • Report this Comment On March 25, 2014, at 10:37 AM, sabebrush6 wrote:

    If all you fools who signed up for the Obamacare ( Unaffordable Care Act) remember, I told you that as soon as people signed up, the price would double.

    Obamacare is NOT about health care. It's all about people control & that means control of your money.

    Next in Obamacare is "direct payment for health care expenses straight from your checking acct". Autopay.

    It's being worked on right now. You will have NO say as to when your bill gets paid. They will take it directly from your bank acct.

    Mark my words.

  • Report this Comment On March 25, 2014, at 12:37 PM, swenk wrote:

    Here is to the Abominable Health Care Act of 2010
- 4 Years Later

    -Jan'10 paying $341/mth for our two person high deductible HSA plan (which for years and years I have kept below the $400 mark)

    -Jan'13 up to $440/mth (ins. co's preparing for the "affordable" HCA)

-Jun'14 shows as $830/mth (I'm told I'll be pushed out of plan to a slightly lower deductible obamacare)

    So call it double or triple premiums, depending on where from- with essentially the same coverage... I'm feeling sick to my stomach!

  • Report this Comment On March 25, 2014, at 1:42 PM, Geodude999 wrote:

    Are insurers in trouble??? WE are ALL in trouble. But we knew already, especially after Obama was re-elected.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2885962, ~/Articles/ArticleHandler.aspx, 9/3/2015 12:33:58 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Keith Speights

Keith began writing for the Fool in 2012 and focuses primarily on healthcare investing topics. His background includes serving in management and consulting for the healthcare technology, health insurance, medical device, and pharmacy benefits management industries.

Today's Market

updated 3 hours ago Sponsored by:
DOW 16,351.38 293.03 1.82%
S&P 500 1,948.86 35.01 1.83%
NASD 4,749.98 113.87 2.46%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/2/2015 4:00 PM
AET $113.56 Up +2.01 +1.80%
Aetna, Inc. CAPS Rating: ****
CI $139.34 Up +0.34 +0.24%
Cigna Corporation CAPS Rating: ****
HUM $181.70 Up +2.45 +1.37%
Humana, Inc. CAPS Rating: ****