The Obama Administration released state and national health insurance benchmark premium rate hikes scheduled for January 1, 2016, which vary by state and by company.
While the average increase is projected to be 7.5 percent per state among the 37 states using the federal healthcare.gov platform, Tennessee’s average rate is estimated to increase by 23.4 percent.
“For most consumers, premium increases for 2016 are in the single digits and they will be able to find plans for less than $100 a month,” said Kevin Counihan, CEO of the Health Insurance Marketplaces.
Premium rate hikes vary by state from a decrease of 12.6 percent in Indiana to an increase of over 30 percent in Alaska, Montana and Oklahoma.
The Center for Medicare and Medicaid Services posted health insurance companies’ proposed rates of increase on June 1, 2015, so that consumers may review the reasons for increases for each company at RateReview.HealthCare.gov.
In considering how these changes impact individual, family and small group (under 50 people) policies, it is important to note that rate hikes also vary by insurance company. Eleven insurance companies in Tennessee made a total of 23 rate review submissions (effective January 1, 2016) ranging from a 22.99 percent decrease in premiums to a 52.06 percent increase, though the majority are single digit changes.
According to David Snyder of Elizabethton Insurance Agents, only three health insurance companies are ACA certified in this region: Blue Cross Blue Shield, United Healthcare and Cigna.
Snyder said there are a number of reasons that rates have gone up, but the biggest cause is likely the guaranteed issue of coverage.
“When they made the guaranteed issue, it raised base premiums about 50 percent in two years,” he said. “I don’t think it will go away, but parts will probably be tweaked and rewritten.”
In the past, the underwriting process determined premiums based on a detailed report of health. Now, companies cannot refuse service to people because of pre-existing conditions. Snyder said premiums are based on four factors, and all of those insured must have their 10 essential health benefits covered, which are outlined in the ACA.
Snyder said he believes the guaranteed issue helps people to get much-needed coverage.
However, the requirement to insure more people with diverse and expensive needs means that the cost of coverage increases.
“Last year, some of my clients said they couldn’t or wouldn’t pay the increase of 19 percent, but then when they renewed, they gained tax credits,” said Snyder.
Marketplace consumers may choose different plans and are not required to stay with their same plan or company. In fact, in 2015, 29 percent of healthcare.gov consumers who re-enrolled in coverage chose different plans, according to CMS. Within each tier (bronze, silver, gold and platinum) are multiple plans, and Counihan encourages people to shop around when re-enrolling.
“If consumers come back to the Marketplace and shop, they may be able to find a plan that saves them money and meets their health needs”, according to Counihan. “Last year, over half of re-enrolling consumers on healthcare.gov shopped and half of those who shopped selected a new plan – that sort of choice and competition was limited prior to the Affordable Care Act.”
According to the CMS, about 70 percent of consumers enrolled in silver plans, which cover about 70 percent of the cost of essential health benefits.
Snyder said there are two incentives to enroll in the silver plan: cost sharing deductions and advance premium tax credits.
The average tax credit for 2015 enrollees that qualified was $270 per month, and more than 80 percent of those who applied for a 2015 marketplace plan qualified, according to the Department of Health and Human Services. Tax credits are determined based on household income (on a sliding scale) and the premium for the benchmark plan.
The numbers for 2016 rate increases are calculated before tax credits are considered.
“Tax credits are good, but I don’t know how long we can sustain them,” said Snyder. “It’s a lot of money.”
He cited an example of how one 62-year-old woman came to renew her policy and saved money through cost sharing and tax credits. Her deductible would have been $4,000 but with cost sharing, it was $300. In a household of two people making a combined $30,000, she received $501/month in tax credits, so where her premium would have been $658 per month, she will have to pay $157.
Snyder said that while true that some insurance companies have gone out of business or increased their rates dramatically, they could withdraw from the marketplace and operate independently.