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ACA’s Impact on Insurance Premiums’s Raises Concern

ACA’s Impact on Insurance Premiums Raises Concerns

By Michael Gomes
Created Jun 23 2014 – 8:13am
Submitted by Michael Gomes [1] on June 23, 2014 – 8:13 AM

Health plans have begun publishing proposed rates for 2015, resulting in a recent flurry of news articles and reports addressing the impact of the Affordable Care Act (ACA) on insurance premiums.

The significance of this trend is underscored in a statement [2] released on June 17 by Karen Ignagni, president & CEO of America’s Health Insurance Plans (AHIP), in which she expresses concerns about keeping health insurance affordable for patients. “Affordability remains a top priority for consumers when it comes to their health care,” she said. AHIP is launching a campaign and new website to discuss the factors that influence premiums.

WSJ Showcasing Higher 2015 Premiums

On June 19, the Wall Street Journal [3] published a front page report warning, “Hundreds of thousands consumers nationwide, who bought insurance plans under the Affordable Care Act, will face a choice this fall: swallow higher premiums to stay in their plans or save money by switching.”  The Journal goes on to say a new picture is emerging in 10 states where 2015 premium insurance rates for individual plans have been filed – “In all but one (state), the largest health insurer is proposing to increase premiums between 8.5% to 22.8% next year.” Ironically, smaller health plans are reducing their 2015 rates in the same market in an attempt to gain market share.

Medical Inflation on the Rise

Among other factors, the Journal article notes that medical inflation – currently projected at  around 5.4% for insured individuals this year – is a contributor to the premium increases, along with the additional coverage requirements created by the ACA. Unfortunately, these increases will outpace gains in household income according to Richard Evans, an analysis at SSR Health, LLC. The White House continues to argue that the ACA should drive competition that will eventually lower premium rates in the marketplace.  Republicans still disagree with that presupposition.

According to a recent report [4] by the Altarum Institute, in April 2014, the Health Care Price Index (HCPI) rose 1.6% above the HCPI of April 2013. This figure is a sharp increase from the all-time low of 1.0%, which was achieved in August of 2012. While the growth rate is above the 1.0% all-time low, it has not greatly affected the 12-month rate, which rests at 1.2%.  Since the start of the recession six years ago, health care prices have increased by 14.3%, in contrast prices in the general economy have increased by 9.8%.  The study authors note “Low economy-wide inflation has exerted downward pressure on health care price growth, but this story may be ending.”  In fact, many economists and public policy experts remain very concerned about potential future premium and deficit funding increases to pay for the ACA, so they are waiting to see how the HCPI is affected over time.

New HHS Report Details ACA Premium Rates and Subsidies

A June 18 HHS Research Brief [5] addressing the financial impact of the ACA provides a clearer picture of what individuals are paying and how they are being subsidized for the policies they purchased through the federal health insurance exchange (Exchange). Monthly premiums for all metal plans cost an average of $346 a month this year for individuals who did not qualify for subsidies.

However, for the 87% of federal Exchange enrollees who did qualify for financial assistance, the average tax credit was $264 a month with an average monthly premium of $82. That’s an average tax credit of about $264 a month, or $3,168 a year. Although average premiums for people obtaining subsidized coverage through a federal Exchange was $82 a month, states saw much higher and lower averages. For example, Mississippi residents paid a low of $23 a month on average while New Jersey residents paid a high of $148 per month after tax credits were factored in (See Table A1 page 23).

Although not referenced in the HHS report, many are waiting to see the total price tag of all of these subsides and the impact these expenses will have on the federal deficit and economy.

CBO No Longer to Score ACA Cost

Perhaps the icing on the cake is a recent statement [6] issued by the Congressional Budget Office (CBO) that the federal agency is no longer able to score the Affordable Care Act’s cost in total. “A retrospective analysis of the effects of current law is very different from a cost estimate for proposed legislation, particularly because it requires formulation of a counterfactual benchmark representing what would have happened if the law had not been enacted – a challenging undertaking that is beyond the scope of CBO’s usual analyses,” Director Doug Elmendorf wrote.

But, Elmendorf also added that CBO can “still produce separate estimates of the effects of the ACA’s provisions related to insurance coverage, in part because those provisions established entirely new programs or components of programs and in part because those provisions are mostly being implemented in 2014 or later.”

Stay tuned as BenefitMall continues to report on 2015 premium rates and medical inflation trends.

It’s important to note that the federal health care reform initiative discussed in this blog is referred to by several different acronyms including ACA, PPACA and ObamaCare. No matter what the term, BenefitMall will continue tracking and reporting on key health care reform trends that affect Brokers, payroll personnel and key stakeholders.

The views expressed in this post do not necessarily reflect the official policy, position, or opinions of BenefitMall. This update is provided for informational purposes. Please consult with a licensed accountant or attorney regarding any legal and tax matters discussed herein.


Health plans have begun publishing proposed rates for 2015, resulting in a recent flurry of news articles and reports addressing the impact of the Affordable Care Act (ACA) on insurance premiums.