Premiums for health insurance plans sold in the Obamacare marketplaces are heading higher in 2017, but are Obamacare premium increases as steep as presidential candidate Donald Trump says? During last Sunday's presidential debate, Trump asserted that premiums are climbing by more than 50%.
In this clip from The Motley Fool's Industry Focus: Healthcare podcast, analyst Kristine Harjes is joined by contributor Todd Campbell to discuss how much Obamacare premiums are actually climbing next year.
A full transcript follows the video.
This podcast was recorded on Oct. 12, 2016.
Todd Campbell: One of the first statements that was made in the debate was Trump's assertion that premiums are rising by fairly dramatic numbers, 68%, 59%, 71%. Those are big increases.
Doing a little bit of fact-checking on this, there are some communities and specific plans within some communities where premiums are increasing by levels that are high, in the double digits. But those are very rare. Kaiser Family Foundation went through and did an analysis in July and they found that the average plan is going up by about 9%. Of course, that's far south of the numbers that Trump was mentioning. But there are some areas where premiums are increasing for specific plans. For example, in Nashville, Tennessee, increases are about 25% in 2017, versus 2016. So, while he is saying there's a really large increase, it's not really across the whole nation. It's for specific communities that are seeing large increases. So, that's where we come down on that.
Kristine Harjes: So, this is really a question of scale when it comes down to it. When you're talking about one specific circumstance, it is far more likely that you can get some sort of astronomical number, as opposed to when you look at the average in an area, and even more so when you look at the average nationwide.
Campbell: Yeah, and there's another observation here we have to remember. Although premiums are increasing, we also have to remember that the absolute out-of-pocket cost -- if you're at home and you have an Obamacare plan, don't start panicking. If you receive subsidies, the subsidies are adjusted. Most people who get Obamacare receive subsidies.
Harjes: Right, 82%.
Campbell: Yeah, 82%. And most people who get subsidies pay less than $100 a month for their insurance, which I think most people will agree is a pretty low price to pay for their healthcare insurance.
Harjes: And the subsidies get adjusted for these price increases, too.
Campbell: And the subsidies get adjusted upward based upon the cost of the plans. So, premiums are heading higher, but those higher premiums, the brunt is really borne by those people who -- like myself -- participate in the Obamacare exchanges but don't qualify for the subsidies.
Harjes: There's also another dilemma going on here. It's something that we've talked about on the show before. There's this issue between health insurers being so unprofitable on these exchanges that they're dropping out, possibly leading to lower competition, which you could imply would mean even higher prices, versus the other side of that coin -- the insurers could hike prices to make themselves profitable.
Campbell: Right, Kristine. At the heart of the matter, what Trump is really saying is that premiums are rising rapidly, and that's a big problem. There's evidence, and we've talked about it on the show previously, that insurers have not adequately priced their plans to turn a profit. United Healthcare (NYSE:UNH), as you were alluding to, has already said that they're going to go from providing health insurance in a couple dozen states to just a handful of states in 2017, because they're losing hundreds of millions of dollars on the plans that they offered this year.
Harjes: So, when we look at this statement as a whole made by Trump, it's true that numbers are going up. Whether or not there are individual cases of 68%, 59%, 71%, that's entirely possible. I would say the statement, as a whole, is true but needs context. Is that fair?
Campbell: I think that's pretty fair.