Obamacare premiums to rise a modest 4.2% in 2015

By Stuart Pfeifer, Chad Terhune, Soumya Karlamangla
Los Angeles Times, July 31, 2014

Defying an industry trend of double-digit rate hikes, California officials said the more than 1.2 million consumers in the state-run Obamacare insurance exchange can expect modest price increases of 4.2% on average next year.

“We have changed the trend in healthcare costs,” said Peter Lee, Covered California’s executive director. “This is good news for Californians.”

State officials and insurers credited the strong turnout during the first six-month enrollment window that ended in April for helping to keep 2015 rates in check. But others cautioned it’s still too early to gauge the health law’s impact, suggesting several factors may be temporarily holding rates down in the individual market.

“We don’t really know what the real cost of Obamacare is yet because insurance companies are heavily subsidized for the first three years” of the law’s implementation, said Robert Laszewski, a healthcare consultant in Virginia who has closely tracked the overhaul. “The insurance companies essentially can’t lose money.”

California Insurance Commissioner Dave Jones said the modest uptick in premiums was a positive sign, but he said insurers were likely motivated by a November ballot initiative, Proposition 45, that would give his office new authority to regulate health insurance rates.

“This is merely a pause in the double-digit rate increases we’ve seen historically,” Jones said.

Consumer Watchdog, the Santa Monica advocacy group pushing Proposition 45, said insurers held back this year to avoid that kind of voter backlash.

WellPoint Inc., Anthem Blue Cross’ parent company, Kaiser and other insurers have contributed more than $25 million to defeat the ballot measure.

http://www.latimes.com/business/la-fi-obamacare-2015-rates-20140801-stor…

Before we discuss some of the possible reasons that the 2015 increase in premiums for California’s ACA exchange were held down to 4.2 percent, we should mention the bad news that is not being covered by the media. We are celebrating an artificially low increase that is still twice the rate of inflation – 2.1 percent (Consumer Price Index, June 2014 – Bureau of Labor Statistics), as workers continue to fall behind over the last three decades of increasing income inequality.

Although ACA enthusiasts are touting success in controlling health insurance premiums, there are many reasons why their celebration is premature, but two stand out.

Proposition 45, which will be on the November ballot, would provide authority to California’s insurance commissioner to regulate health insurance premiums. The last thing the insurers want to do is to anger voters with high rate increases just before this election. The insurers have already contributed over $25 million to defeat this measure.

The other important reason is that the insurers are still protected by reinsurance and insurance rate corridors. In fact, the Obama administration adjusted this coverage to be sure that the insurers were fully protected again next year should they not receive enough premium revenue to meet their expenses. They can’t lose! Of course they are going to come in with low bids when they are under the threat of voter revolt.

And what about the next year when they no longer have protection against losses? We already know the routine. “The patients enrolled in our plans were older and sicker while the younger, healthier individuals were covered by plans at work, or bought the cheap catastrophic plans, and the new drugs that cost tens of thousands of dollars or more placed a strain on our budgets, and our contingency reserves were depleted with the market crash of 2015, and we’ve lost our rate flexibility with the termination of government reinsurance, and…” Well, you know.

Although there are many other uncertainties as the implementation of ACA plays out, one certainty that we can rely on is that insurers will be requesting much larger premium increases for 2017, possibly double digits. That would not be happening under a single payer national health program.