ObamaCare affects premium rates, that much is for sure, but whether or not they are rising or falling seems to depend upon your news source.  Sure, that was meant as a back-handed dig on those super useful biased news outlets, but there is actually some good truth in the idea that rate fluctuations are a matter of perspective.  Let’s take a look at what is really happening in regards to the ACA and insurance premiums.

ObamaCare’s Rate Review Provision and 80/20 Rule

The first thing we want to look at is how the ACA protects us against rate hikes.  If we ignore this and lead with how the ACA increases rates we are doing injustice to pretty much the only thing in America keeping insurance premium rates down.  There are two main ways in which the ACA curbs premium rate hikes:

1) The rate review provision in the ACA says that if an insurer wants to raise rates by more than 10% in a given year they must get permission from a state review board.  This has already stopped many insurance rate hikes from going into effect and curbed other ones.

2) “The 80/20 rule” provision says that insurers must use 80% of of premium dollars on claims and activities to improve health care quality. 85% in large group markets.  Since profit is restricted in some respects under the law price gouging for the benefit of CEO’s and shareholders is disincentivized.

Both of these provisions are doing their part to keep costs down, but neither one has had the utopian effect of truly lowering every ones premiums.

ObamaCare Contributes to Premium Increases Too

The law was loaded with new benefits, rights, and protections for consumers and one big win for insurers (more customers via the mandate to buy insurance).  Of course with insurers now taking on everyone and their mother (literally) the FEAR set in that having to actually insurer every unhealthy person in America would be expensive.  What if not enough young people signed up?  What will they do now that they can’t cut off expensive cancer treatments when someone hits an annual decidable?  This fear (sometimes justified, often not) caused some insane premium increases leading up to the first open enrollment.  ObamaCare was trying to do something nice for everyone, and we all paid for it.  But the price has been paid.  Moving into 2015 it’s business as usual (only this time with more protections) that means the expected unfair price increases to pay for the insanely expensive healthcare we all need.

On that note we could segue into another article on the root cause of most of our problems, health care costs.  But that is another story of the ACA doing good, but not enough to flat out fix the issue.

Premiums Have Risen Every Year

Premiums had been rising at an unsustainable rate before the ACA was signed into law.  Part of the reason we needed the ACA was because of this fact.  In some ways subsidizing unaffordable insurance to make it affordable is a bandaid, but like it or not the ACA hasn’t drastically curbed premium growth for America as a whole in one way or another.

Although There May Be Success For the ACA Down the Road

We should note that from what we know so far premium increases in 38 states are as low as 6%.  This is the lowest increase in years.  Add it to last years shock and it doesn’t seem as attractive, but given the facts we expected that first increase and were hopping for lower increases moving forward.  If this continues it will actually cement the ACA as a success in regards to premiums.

So Much Is Based on Region and Provider

Above we say the ACA hasn’t curbed premium growth as much as we’d all ideally like, nor has it risen for everyone at an unexpected rate as a whole.  But of course this is “as a whole”.  If we pick out specific regions in specific states, if we pick up specific providers and specific plans we can see drastic effects in one way or another.

Insurance prices are set by private insurers and are set differently in every region.  Although the same plan will always cost the same amount in a given region a similar plan in one region in one state could cost thousands more a year than essentially the exact same plan in another region.  Simply put Joe in Texas could see his premium jump $3,000 a year while Jill in New York could see her premium stay the same and is now eligible for subsidies making her out of pocket costs fall by about $3,000 a year.  Two different people both affected by the ACA, insurance industries, and healthcare costs.  Two different perspectives on how ObamaCare is affecting health insurance premiums.

The Bottom Line on Rate Hikes Under ObamaCare

The bottom line.  The ACA does a lot to protect to us against rate hikes, sets the framework to protect us more in the future, and at the end of the day is to blame for both more affordable and less affordable insurance.  It’s all a matter of perspective.  Next time you read a talking point claiming one way or another, remember they are simply giving you one half of the story.

What do you think?

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Paul Mullen on

Premium changes are going to be all over the place – some insurers found they had set rates too low last year and have raised them by up to 25%. Others found that they had set their rates too high, so have reduced rates this year.

The plans which had set very low rates last year were naturally the most popular, so many people will find that they have a big increase in premium in 2015. Worse still they are going to find that their premium subsidy, which is based on the cost of the second lowest Silver plan, will increase by a much smaller amount. So net premiums (premium less subsidy) will often increase by a much bigger percentage.

We are going to see huge differences in premium increases between states. States like California, Oregon or New York have refused to approve large increases and kept the 2015 rates very low while other States, including Florida, have allowed insurers to get huge increases.

Finally, remember that you will be another year older in 2015 and (unless you live in New York or Vermont) health insurance premiums increase with age. So, even if your insurer has not changed their rate, your premiums will increase each year as you get older. The annual increase with age varies by age group – around 1% for those under 30 but averaging 4.5% a year from age 46 to 60.

L. Howell on

I have my own small firm and this year my health insurance premium went up 27% just like it used to do before the ACA. My premium leveled for a couple of years and then went back to the same increases as before. So no real change for me EXCEPT after having breast cancer 3 years ago, I am so very grateful for being protected with a pre-existing condition and if I should ever get sick again with any condition and can’t work, at least I know I will have health care. Thank you, Mr. President. On another note, congress could make changes to improve the premium increases if they wanted to help Americans but they’d rather sit on their hands and watch us struggle.