An Obamacare Premium Dilemma
A Wall Street Journal story Thursday analyzing premium patterns for the 10 states that have released 2015 health insurance rates concluded that some consumers might benefit from switching plans during open enrollment this fall. It also revealed a dilemma for the Obama administration: Making renewals easier for consumers may cost consumers more money.
In most states, the Journal reported, the largest insurers have submitted premium increases of 8.5% to 22.8%. “With dominant market share now, analysts say, carriers feel they have room to raise rates,” the article noted. Conversely, many carriers with smaller market share “are proposing to cut rates so they can lure customers as the cheapest plans in their markets.”
Because federal premium subsidies are tied to the second-lowest-priced “silver” plan on each exchange, shifting rates could surprise some consumers. For example: Say Insurer X gained a large market share in 2014 by submitting the second-lowest silver plan premium, at $250 per month. In 2015, then, other insurers might lower their bids to attract market share, keeping the state’s second-lowest silver plan at $250 per month. But say Insurer X proposed a 10% rate increase, to $275 monthly.
Under this scenario, consumers who stick with Insurer X would pay the full cost of the 10% rate increase ($25 per month). Federal premium subsidies would not offset any of the higher premiums. So it’s possible that individuals with a subsidized premium of $50 per month in 2014 could face a 50% increase in net premium costs (from $50 per month to $75) by remaining with their current insurer.
The Journal article noted that the administration has not yet announced “the re-enrollment process for people who bought coverage in 2014.” That’s because the administration faces a double-edged sword: Making reenrollment easier could result in premium increases for many individuals, particularly because the most widely subscribed plans have proposed significant rate hikes. On the other hand, requiring those who are enrolled to start over and repeat the process increases both the likelihood that enrollees will switch to a cheaper plan and the risk of a technical debacle similar to Healthcare.gov’s launch last fall.
Whatever decisions are made about the reenrollment process, the administration’s choices are likely to have ramifications for insurers, individuals, taxpayers and perceptions of the law generally.
This post was originally published at the Wall Street Journal Think Tank blog.