Obamacare Exchange Average Premium Hike 16 Percent Next Year
Caroline F. Pearson of the Avalere consulting firm has surveyed states which have already published 2017 Obamacare exchange premiums. Among eight states and the District of Columbia, the average requested rate hike is 16 percent for popular Silver plans:
Specifically, average proposed rate increases across all silver plans in the nine states examined range from 44 percent in Vermont to 5 percent in Washington. In 2016, 68 percent of exchange enrollees selected silver plans.
According to the data, in most states, proposed premiums for lower cost silver plans increased less dramatically or even went down for 2017, compared to higher-cost plans on the same tier. Lower-cost silver plans tend to be most popular with consumers, making this portion of the market more competitive as plans seek to attract enrollees.
The devil is in the details: The lowest premium Silver plan is going up seven percent, and the second lowest 8 percent, which means most Silver plans are going up more than 16 percent.
This widening of premium dispersion is not what we would expect in a functioning market. Instead, we would expect prices to converge towards the lower premiums. The dispersion is explained by Obamacare’s poorly designed subsidies, which make the second-lowest cost Silver plan the “sweet spot” for insurers, because that is where subsidies are maximized. Insurers that want to shed market share, because they have lost money, increase the difference between their offering and the second-lowest cost Silver plan.
Premiums in other “metal” tiers (Bronze, Gold, and Platinum) are likely to increase at even faster rates, because insurers want to drive beneficiaries into the second-lowest cost Silver plan, where taxpayers pick up the biggest share of the tab.
Avalere’s analysis corroborates my recent finding, that insurers are increasingly skilled at getting taxpayers to pay a greater share of beneficiaries’ Obamacare premiums.
So my wife’s premium for 2016 is something like $500 per month. The estimates vary by region, age and plan, but 116% of $500 is $580. Her annual premium is $6,000 in 2016, so basically she’s supposed to pay an extra $1,000 per year for coverage that provides for none of her medical needs. By 2017 I suspect the deductible will have risen to $7,000. In return for $7,000 in annual premiums she gets a bronze plan with a $7,000 annual deductible before the plan covers any of her medical needs. How is that not like throwing money down a rate hole?
Devon, your wife lives in TEXAS and TEXAS Blue Cross is asking for a 58% rate hike.
So, redo your numbers Devon.
Statistically speaking your wife is purchasing catastrophic coverage which she will use very infrequently
The chances of a person spending more than $14,000 a year in medical expenses is probably 5 percent a year
To spend that money every year just to cover the year or two you need it is throwing money down a rathole
A more efficient way to cover that $14,000 would involve a $190 a month contribution per month for a total of $6,650 over 35 months
This builds to a $15,000 paid up plan which requires only a $40 a month maintenance fee
We coming out with products to build on that foundation to provide coverage for the vast majority of medical expenses
Don, I remember you used to say that your plan was like a super-charged tax-free HSA. I’m glad you stopped saying that.
A $40 maintenance fee sounds really high to me.
You need to provide plan documents so we can go over them with a fine tooth comb.
You title is somewhat misleading but is consistent with your bias toward Obamacare in general. Requested rate hikes are not, and never have been, equivalent to ACTUAL approved rate hikes. It does make for more drama however!
C A Butler, you are correct. The OR Insurance Department increased the rate hike from the requested rate hike because they didn’t want the insurance companies going out of business with too large of losses.
All of America has a bias against Obamacare if you read the polls. That’s that crazy drama for you.
TEXAS Blue Cross’s 58% rate hike should have been mentioned in this story but was left out – WHY?
How about NE Blue Cross rate hike?
Ron
Why don’t you call us at 713-850-8534 and set up a go to meeting
“Premiums in other metal tiers (Bronze, Gold, and Platinum) are likely to increase at even faster rates, because insurers want to drive beneficiaries into the second lowest cost Silver plan where taxpayers pick up the biggest share of the tab.”
Good news for those buying bronze plans and filling in the gap with efficient funding vehicles having no cost of insurance charges, if this prognosis comes true
A good portion of the funding can come from premium savings
Don, you write, “buying bronze plans and filling in the gap with efficient funding vehicles having no cost of insurance charges…”
Don – this means nothing.
Why do you say that Ron
Are you implying I am not telling the truth?
Why do you say that Ron Are you implying I am not telling the truth?
No No No
I’m saying that – Good news for those buying bronze plans and filling in the gap with efficient funding vehicles having no cost of insurance charges, if this prognosis comes true A good portion of the funding can come from premium savings
I’m saying this is gobbledygook that doesn’t mean anything.
Maybe you should link to the plan documents so we can understand.
Maybe you should call us to set up a go to meeting
It lasts about 30 minutes
We can address most of any concerns or questions you may have
Don, if you can’t explain it here why do you keep talking about it?
I wish every time an average rate increase is alluded to it is made clear whether this is for an identical plan year over year. If the deductibles are increasing or benefits are otherwise reduced, the effect is a much greater increase. That is the real story at the consumer level and should be the prime focus of any analysis.
Uderwriterguy, you are way too complicated. Underwriters always are so we did away with them, unless you smoke. No No, they change the PPO for an HMO and say the rates didn’t go up much!
Of course everybody should change insurance every year in Obamacare’s musical chairs.
Obamacare is insurance for dummies.
Done away with? Say it ain’t so. My moniker notwithstanding, think of my comments as coming from someone who priced experience rated and ASO accounts as well as rate reviews for HMOs and PPOs. Never any individual and not much small group (<50).
Liked your comments, though.