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Obamacare’s rate creep challenge

By Jay MacDonald ·
Friday, April 11, 2014
Posted: 6 am ET

Supporters of the Affordable Care Act, including Obamacare's proud namesake, have been taking a deserved victory lap after signups for health insurance on federal and state exchanges during their first open enrollment period exceeded the administration's original goal of 7 million. Yesterday Health Secretary Kathleen Sebelius told a Senate panel that at least 7.5 million people have enrolled.

Hours later, the White House announced she was resigning. President Barack Obama is expected to nominate Sylvia Mathews Burwell, the director of the Office of Management and Budget, to replace Sebelius.

A new report from the Rand Corp. has brought more good news on the signup front. It predicts that once the dust settles, Obamacare will have led to a net gain of 9.3 million newly insured in its inaugural season, reducing the share of uninsured Americans from 20.5 percent to 15.8 percent.

You knew there would be a "but," right?

Sharp increases in premiums seen

This "but" comes via Forbes, which tempered the Obamacare victory celebration with the sobering results of a new, proprietary survey by Morgan Stanley health care analysts that finds health insurance premiums are "showing the sharpest increases perhaps ever."

The investment firm chatted up 148 brokers in the small-group and individual health insurance markets. According to the survey, the cost of health plans has jumped 11 percent in the small-group market and 12 percent in the individual market, the largest increases in three years.

The analysts, according to Forbes, concluded that the increases "are largely due to changes under the ACA."

In a similar survey conducted by the Morgan Stanley team in December, 131 brokers reported that rates were rising by 6 percent in the small-group market and 9 percent on individual health plans, largely due to new Obamacare regulations, taxes and fees.

In 1 state, prices have doubled

Not surprisingly, individual plans sold directly to consumers are seeing the most dramatic rate hikes. States with the highest increases include:

  • Delaware, at 100 percent
  • New Hampshire, 90 percent
  • Indiana, 54 percent
  • California, 53 percent
  • Connecticut, 45 percent
  • Michigan, 36 percent
  • Florida, 37 percent
  • Georgia, 29 percent
  • Kentucky, 29 percent
  • Pennsylvania, 28 percent

As for the 'why' ...

What's driving up prices? The analysts listed four factors:

  • The end to "age rating": Obamacare prohibits insurers from charging higher premiums to older, statistically sicker people who cost more, thereby hiking the premiums of young, healthy Americans disproportionately.
  • Commercial underwriting restrictions
  • New excise taxes being levied on health insurance plans
  • New benefit designs.

You can bet that the key consumer features of Obamacare -- including "guaranteed issue," which requires insurers to offer coverage to all; "essential health benefits" that include preventive and maternity care; and prohibitions against charging more to women or those with a pre-existing health condition -- all figure prominently in the new rate structures. Plus, there is little in the law that directly addresses the rising cost of health care.

What do you think? Are the societal improvements to access, health coverage and the new national standard of required benefits worth the rising cost of coverage?

Apparently many young people think so.

Follow me on Twitter: @omnisaurus.

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1 Comment
April 11, 2014 at 5:56 pm

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