“O-care premiums to skyrocket,” said a headline in The Hill, a widely-read website on politics. That dire forecast was a dream come true for legions of the Affordable Care Act's detractors, who spread the troubling assertion far and wide on conservative media outlets.
The thinly-sourced article was based on assertions by anonymous “insurance officials” and one research organization member who said his “gut” told him that premiums for policies sold on state Health Insurance Marketplaces would go up a lot. But a funny thing happed on the way to 2015: The forecast "skyrocketing" is nowhere in evidence.
Here’s what’s going on with 2015 health insurance premiums and what you need to know.
Increases are in the single digits, a not-terrible showing
With preliminary or final individual premiums available for 31 states and the District of Columbia, the average rate increase is 8 percent, according to the most recent (Aug. 15) update of PricewaterhouseCooper’s interactive map. But 29 states have released only the rates that the insurers have requested, not final rates. And the average masks huge variations: In Arizona, for instance, changes in proposed premiums range from a 23 percent decrease to a 27 percent increase. And in any event, 8 percent is not a terrible rate increase by historical standards. In the three years before the Affordable Care Act was passed into law, the average rate increase in the individual market was 10 percent or more—and that was in an era when insurance companies didn’t have to sell to sick people or offer comprehensive health benefits the way they do now.
Some states are using regulatory mojo to roll back outrageous requests
“Some states have the authority to review rates, and do,” Betsy Imholz, a health insurance expert for Consumer Reports, said. “In other states there have been negotiated reductions.”
In Oregon, for instance, average 2015 premiums came in lower than 2014 rates after regulators got done with them. In Maryland, CareFirst, the state’s dominant insurer, asked for outrageous increases ranging from 23 to 30 percent, but was granted still high, but more modest, increases of 10 to 16 percent. And rates are actually decreasing for other insurers.
Premium subsidies protect most from big rate hikes—but with a catch
Nearly nine of every 10 people buying insurance through a state marketplace in 2014 qualified for a tax credit to offset the cost of their premium. The formula used to calculate those credits guarantees that if your income is under 400 percent of the Federal Poverty Level, you’ll be asked to pay no more than a specified percentage of your household income on health insurance premiums. So even if you live in a state with big premium increases, there’s a ceiling on how much you’ll have to pay.
But there’s a catch. The formula for determining your subsidy is based on the premium you’ll pay for a “benchmark” plan, which is the second cheapest Silver plan available to you. Say your benchmark plan has a monthly premium of $400, and based on the formula you are required to pay only $300. You’ll get a subsidy of $100, which you can then use to buy any plan you want, not just the benchmark plan. But if you choose a more costly plan, the extra expense is on you. (Likewise, you can save on premiums by choosing a cheaper plan.)
With rates going in every which direction, it’s likely that your 2015 benchmark plan may be different than in 2014, Karen Pollitz, an insurance expert at the Kaiser Family Foundation, said. If you automatically renew your existing plan and subsidy—which will happen if you do nothing—you may end up paying more than you need to if your plan has gone up while other plans have held steady or gone down. “It’s no fun, but you really do need to go back in to see what’s happening to your rate and your plan, and to your subsidy,” Pollitz said.
Take action: Consumers Union advocates are actively monitoring health insurance rate activity in many states. If you're interested in what they're doing or want to help, here's where to find more information.
Got a question for our health insurance expert? Ask it here; be sure to include the state you live in. And if you can't get enough health insurance news here, follow me on Twitter @NancyMetcalf.
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