The Patient Protection and Affordable Care Act (as it's officially known), or Obamacare (as it's more commonly known), has had quite the tumultuous ride since being signed into law in March 2010.
Based on near-monthly data from the Kaiser Family Foundation's Tracking Poll, the vast majority of Americans don't like Obamacare. Despite this general apathy toward the health law of the land, it still managed to enroll 12.7 million people through its marketplace exchanges for the 2016 enrollment period -- and this doesn't count the millions of other individuals and families who've gained coverage in 31 states through the expansion of Medicaid coverage. According to both Gallup's first-quarter survey and the latest data from the Centers for Disease Control and Prevention (which also includes Medicare enrollees), uninsured rates are at their lowest levels on record as of Q1 2016.
Affordability remains a key concern
But one problem has plagued Obamacare since day one: cost. Although Obamacare's regulations opened the door for many low-income individuals and families to get health insurance, many middle-class families are struggling with rising premium and deductible costs. And since the individual mandate requires everyone to purchase health insurance or pay a shared responsibility payment come tax time, it's leaving millions of Americans with a tough, seemingly no-win choice of struggling to meet their health insurance payments or paying a penalty.
Yet it's not just the consumer that's struggling. Many insurers who've been around for decades and fully understand how to turn a profit underwriting healthcare plans can't seem to make money under Obamacare. UnitedHealth Group (NYSE:UNH), the nation's largest insurer, is a prime example. It's slated to lose around $500 million in 2016 alone from its Obamacare plans in 34 states (after losing $475 million in 2015), and it announced recently that it would be paring back its coverage to all but a handful of states in 2017. We also witnessed more than half of Obamacare's 23 approved healthcare cooperatives close up shop in 2016 due to excessive losses which have been blamed on enrollees who tend to be sicker and use their insurance more often.
This bifurcation of middle-class consumers struggling with rising healthcare costs and insurers dealing with losses under Obamacare isn't a great recipe, and this years' early insurer rate requests demonstrate this.
Obamacare premiums could skyrocket in 2017
The rate request process for insurers is fairly straightforward. Insurance companies submit their upcoming year rate requests by the end of May (usually), and any policy with a request in excess of 10% (both up and down) has to be validated with the state's Office of the Insurance Commissioner, or OIC (every state has its own OIC). An OIC acts as a middleman between the insurer and the consumer to ensure that only reasonable price increases (or decreases) are enacted. Thus far we've received a pretty detailed look at a handful of early rate requests, and with the exception of one lone state, the weighted average increase looks to be in the double-digit percentile across the board.
Two weeks ago we took a brief look at Virginia and Oregon, two of the first states to make their insurers' rate request hikes public. According to ACASignUps.net, insurers in Virginia and Oregon are requesting a weighted average rate hike of nearly 18% and 27%! For those hoping these early figures were anomalies, recent rate request publications from New York, Maine, Maryland, Florida, and Washington state prove otherwise.
- New York: According to the New York State Department of Financial Services, insurers in New York are requesting hikes ranging from as low as 6.1% to as high as 89.1%, with a weighted average on the individual market of 17.3%. UnitedHealth, which only covers 2% of New York's Obamacare enrollees, requested an increase of (and I hope you're sitting down for this) 45.6%!
- Maine: Individual market insurance companies in Maine are requesting premium price increases predominantly ranging from 14% to 24%, with the Maine Community Health Options co-op, which insures more than 80% of the state's ACA policyholders, requesting a whopping 22.8% premium hike. National insurers Aetna and Anthem are requesting hikes of around 14%.
- Maryland: Much of the same can be seen in Maryland, where the largest individual market insurer, CareFirst BlueCross BlueShield, is requesting a 12.4% hike on its HMO plan, and 16% increases on two other plans. Mind you, this is after CareFirst received a 26% increase in premiums for 2016. National insurer CIGNA is asking for nearly a 30% premium price hike, while Evergreen Health Cooperative is on the other end of the spectrum asking for just an 8.1% increase.
- Florida: Based on data from Florida officials earlier this month, 15 health insurers are looking for an average premium increase of 17.7% in the Sunshine State, which is basically double what was approved by regulators last year.
- Washington: Within my home state of Washington, 13 health insurers spanning 154 plans submitted average rate hike requests of 13.5%. These ranged from a low of 7.4% (Coordinated Care by Centene) to a high of 20% from Premera.
The aforementioned lone exception that I could find is Vermont, which only has two ACA insurance providers to begin with. BlueCross BlueShield of Vermont and MVP Health Plan proposed average premium increases of 8.2% and 8.8%, respectively.
The smartest ways to save money on Obamacare
Put plainly, these price increases are terrifying, and it means consumers are going to need to be extra vigilant to ensure they're getting the best value for their health plan in 2017 and beyond.
For starters, more people likely qualify for Advanced Premium Tax Credits (aka, subsidies) than realize it. According to a Kaiser Family Foundation survey in Dec. 2015, about a third of the uninsured individuals polled either believed the individual mandate didn't apply to them, or didn't know, suggesting many of these consumers aren't considering health insurance for themselves. However, subsidies are available to citizens earning up to 400% of the federal poverty level in 2016, or $47,080 for a single individual. A family of four can earn up to $97,000 in 2016 and still qualify for the APTC.
The difference between being exposed to retail premium prices versus subsidized premium prices is huge! In 2016, the average national premium is $407 a month without subsidies and $113 per month with subsidies. It's important to look into whether or not you qualify for financial help to get covered within your state.
For the roughly 15% of Americans enrolled through Obamacare's marketplace exchanges, but not covered by subsidies, your best bet is going to be to shop around. As we see above, insurers can dramatically change their policy pricing from one year to the next, so there are no guarantees that 2016's cheapest plan is going to be the cheapest in 2017. Allowing yourself to be automatically enrolled could wind up costing you a significant amount of money. If you take the time to really understand your options, chances are you'll save money.
It's important to keep in mind that these aforementioned rate requests are still preliminary and streaming in, so there could still be some fluidity to them. Last year we did indeed see OIC's push insurers for lower rate hikes in a number of states. But, the data is pretty clear that insurers need higher premiums to sustain underwriting health plans on Obamacare, which doesn't bode well for the consumer.