According to America’s Health Insurance Plans (AHIP), health care premiums may rise sharply in 2017. According to Morning Consult, Marilyn Tavenner, the president and CEO of the national policy advocacy and trade association, “is concerned.” Yet if last year is any indicator, the initial numbers we’re seeing now are no reason to panic … yet.
Proposed health insurance increases are not final increases
Insurers are currently in the process of submitting opening bids to regulators. The rates will be finalized in the fall, but first they’ll be subject to review and negotiation. Ultimately, the increases we get are likely to be lower than the increases now being proposed.
Look at what happened in 2015, for example. “Some states saw double-digit premium increase requests, causing accounting heartburn for health professionals,” said Morning Consult Contributor Caitlin Owens. “But then the average rate increase for 2016 wound up at just 8 percent.”
That’s an average, of course. Some double digit increases did occur. However, this much at least is clear: Proposed rates are “not a reliable indicator of what typical consumers will actually pay,” as Ben Wakana of the Department of Health and Human Services told Morning Consult.
2017 health insurance rate increases will probably be higher than 2016 increases
That said, according to Tavenner, next year’s hike will probably be steeper than this year’s. The reasons are:
- Medical cost trends. Typical increases are to be expected.
- Cost of drugs. There’s been a recent surge in pharmaceutical spending.
- Market changes. Costs stemming from ACA regulations have not been sufficiently offset by an influx of healthy new customers.
- Customer churn. The ACA encourages people to shop insurers, yet when insurers don’t know who their customers will be next year, premiums rise.
Speaking of the ACA, the “most ominous factor” driving this year’s rate requests is that in 2017, two of the programs that the law established to mitigate risk for insurers will end: reinsurance and risk corridors.
These programs – along with a third, risk adjustment – are collectively known as the three Rs. They exist because until recently, insurance plans had very little data on how healthy their enrollees were, and without such data, it’s hard to set premium rates accurately. Insurers were guessing in the dark, so the three Rs were offered as strategies they could use to avoid losing money if their estimates were off.
Now three years later, they have the data they need. So the programs (two of them, at least) are no longer necessary. Not everyone agrees with this thinking. “Tavenner is among those in the insurance industry who say the ACA marketplaces are not yet stable,” Owens said.
The conclusion? Wait and see
For now, Tavenner can do little more than bring awareness to problems and state her intention to overcome them. “No one wants to sustain these types of premiums over the long term, so it’s our job to help come up with solutions so that the exchanges can continue to grow and stabilize out,” she said.
In the meantime, it’s a waiting game. At BeaconPath, we see two choices: You can take your chances next fall, or you can start exploring cost saving options now. Interested in option 2? Download our latest free report, to learn strategies that could save you 10% or even more.