Confirmed: Obamacare premiums going up an average of 25% in 2017

The Obama administration confirmed Monday that Obamacare prices are going up sharply next year, with average rate hikes above 20 percent in the 39 states using the federal exchange. From the Associated Press:

Before taxpayer-provided subsidies, premiums for a midlevel benchmark plan will increase an average of 25 percent across the 39 states served by the federally run online market, according to a report from the Department of Health and Human Services. Some states will see much bigger jumps, others less.

Moreover, about 1 in 5 consumers will only have plans from a single insurer to pick from, after major national carriers such as UnitedHealth Group, Humana and Aetna scaled back their roles.

“Consumers will be faced this year with not only big premium increases but also with a declining number of insurers participating, and that will lead to a tumultuous open enrollment period,” said Larry Levitt, who tracks the health care law for the nonpartisan Kaiser Family Foundation.

Despite the shockingly bad news, the AP can’t resist turning this into a ‘Republicans pounce’ story. The 5th paragraph begins, “Republicans will pounce on the numbers as confirmation that insurance markets created by the 2010 health overhaul are on the verge of collapsing in a ‘death spiral.'”

Obamacare proponents are fond of saying that the big price hikes won’t affect most customers. And so you get paragraphs like this one from CNN’s report on the price hikes:

Most consumers, however, are shielded from these price hikes, especially if they return to the exchanges to shop after enrollment opens Nov. 1. Some 85% of Obamacare enrollees receive federal subsidies, which can lower their premium to less than 10% of their income.

That 85% statistic is intentionally misleading as it only includes people buying insurance plans on the exchange. But millions of people who aren’t eligible for subsidies buy the same plans off the exchange. As the AP points out, “an estimated 5 million to 7 million people are either not eligible for the income-based assistance, or they buy individual policies outside of the health law’s markets, where the subsidies are not available.” So it’s not true that 85% of people buying these plans will be shielded from the double digit premium hikes and that may indeed be reason to suspect a death spiral (or Zombie spiral) in our future.

But if CNN misses this point about subsidies it does catch another point that is just as important. The fact that many Obamacare enrollees won’t face the brunt of the increase doesn’t mean it’s not being paid. It just means the burden is being shifted to taxpayers:

The premium increases also mean that Obamacare is growing more expensive for the federal government since it has to provide larger subsidies. But the program is still costing less than the Congressional Budget Office originally estimated since fewer people have enrolled and insurers priced their plans lower than expected.

In addition to the price hikes, the administration also confirmed that about 20% of those buying plans for next year will only have one insurance company to choose from. That’s bad news but it’s not unexpected. The NY Times published a story back in August which predicted this would be the case based on an analysis by the McKinsey Center for U.S. Health System Reform.

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David Strom 8:31 AM on October 02, 2022