Back in the spring, once it became apparent that enrollment in Obamacare would nearly match or even exceed projections, the law’s detractors on the right started coming up with new predictions of doom. Among the most popular: Premiums in 2015 would soar, these critics said, because the people signing up for coverage would be older and sicker than the insurance companies had expected.
Some of the warnings came from anonymous insurance company officials, speaking to reporters. Others came from respected conservative health care analysts, based on their preliminary interpretations of enrollment data. The reports sometimes came with caveats and qualifications, acknowledging the uncertainty of trying to predict future premiums based on such early, limited information. But such nuance rarely made it into the broader political conversation. Everybody paid attention to the headlines, like this infamous one that ran in The Hill in late March: “O-Care Premiums to Skyrocket.” References to Obamacare premiums "doubling" and even "tripling" were all over the right-wing press.Want to keep up with the latest Obamacare news? Sign up for QEDaily
More than four months later, we have some better information. Insurers have filed their proposed 2015 premiums with state regulators and the regulators have started making those submissions public. It’s still too early to draw definitive, specific conclusions. But a group of experts that I consulted agreed that a clear trend is emerging.
Coverage will get more expensive for the majority of consumers, as it almost always does. Changes in premiums will vary enormously, from state to state and from plan to plan. But, overall, the 2015 premiums increases will not be significantly worse than they were in the past. They might even be a little better.
Some of the best news so far has come from California, where officials last week announced that the average premium increase would be just 4.2 percent. That's a "weighted" average, which means that it takes account of how many people enroll in different kinds of plans. Uwe Reinhardt, the Princeton economist, told me that the California announcement prompted him to send condolence notes to his conservative friends, because the news "spits in their preferred narrative."
But on the very next day, officials with Florida Blue, the Blue Cross affiliate in the Sunshine State, announced that they were raising rates on their plans by an average of 17.4 percent. Florida Blue isn't the only carrier in the state, but it is the largest. About one-third of all Floridians who bought individual coverage through Obamacare bought a Florida Blue policy. Other states where average premiums are rising by more than 10 percent include Indiana and Virginia.
The map below, by PriceWaterhouseCooper, shows average premium increases in the states that have released partial or total information. There's an interactive version, with more detail, at the PWC site.
The specific figures in the PWC map may be a little misleading because few states have adjusted figures to reflect plan popularity, the way that California has. But the map does give you a sense of how much premiums can vary from state to state.
Why the disparities? One likely factor is how diligently officials have worked on implementing the law. California’s were enthusiastic about Obamacare from the get-go. They created their own marketplace for buying insurance and adopted an “active purchaser” model, which means the marketplace’s managers can bargain aggressively with carriers to get low premiums. In addition, California regulators have the authority to review and reject insurance premium increases that seem excessive. (A new measure on the ballot would give them even more power; some experts think insurers bid low this year just to undermine support for the initiative.)
In Florida, by contrast, the Republicans in charge did very little to promote the law and, at times, seemed determined to undermine it. Never was this more clear than in 2013, when the legislature passed and Governor Rick Scott signed a bill that suspended state government's ability to reject excessive premium increases. Florida regulators had a reputation for vigilant oversight, so this may have been no small thing.
'I put the most credence in what insurers do, not what they say.' —Economist Len Nichols
Another key variable is how insurers priced their plans last year—in effect, whether they underbid or overbid. “I think the premium increases that we have seen have been modest though with exceptions,” says John Holahan, senior fellow at the Urban Institute. “The biggest jumps seem to be among plans that had low rates in 2014. So I expect some convergence and some changes in who ends up being the second lowest cost plan.”
One final issue is the Obama Administration’s “keep your plan” fix. As you may remember, the Obama Administration in late 2013 told state officials they could effectively expand the law’s “grandfather” provision, so that people who had ultra-cheap plans before 2014 could hold onto them. Some officials said no thanks. Others made the change. Now insurers in those states say healthy people are clinging to the old plans, which means the people buying the new ones tend to be in worse health. Insurance industry spokesmen say it's a big reason why some carriers are raising premiums. Experts like economist Paul Ginsburg, of the University of Southern California, agree. "To me one of the biggest risks to the long-term viability of the program is panicky decisions by the Administration, such as allowing people to keep their plans for a long time," he says.
Still, you have to put even the larger increases into the proper context. The data on insurance premiums before the Affordable Care Act took effect isn’t great, but a study of it by MIT economist Jonathan Gruber, for the Commonwealth Fund, showed that average premiums for people buying on their own increased by 9.9 percent in 2009, 10.8 percent in 2010, and 11.7 percent in 2011. We don't yet know what the overall average increase for 2015 will be. But an early estimate from the consulting group Avalere, based on "silver plan" filings from nine states, suggested it would be 8 percent—in other words, a bit less.
Economist Uwe Reinhardt told conservative friends that California's news "spits in their preferred narrative."
Florida Blue is one of the companies for whom double-digit increases are nothing new. In fact, last year's increase of 16.5 percent was virtually identical to this year's. “No one can claim in good conscience that a 10 percent rate increase or more would signal the advent of something new and unprecedented,” Greg Mellowe, policy director of consumer group Florida CHAIN, told Kaiser Health News. “For years, this was standard practice in Florida.”
Of course, things are a little different now. Federal tax credits, worth hundreds and sometimes thousands of dollars a year, shield most people buying Obamacare insurance from its full price. And once open enrollment begins in November, consumers will have the option to shop around and find cheaper plans.
To be clear, everybody I interviewed was cautious about what next year's insurance market will look like. It's still early, they noted: The information we have is incomplete, and insurers are still not entirely sure about what kind of customers they are attracting. And of course overall premium growth is just one way to measure the Affordable Care Act's performance, to be considered alongside the law's many other strenghts and failings. But the experts I consulted all saw the available information as relatively encouraging, particularly in comparison to what many were predicting just a few months ago.
"Some insurers are increasing premiums quite a bit, but others are actually decreasing premiums, which is almost unheard of in health insurance,” says Larry Levitt, senior vice president at the Kaiser Family Foundation. “It seems that insurers that priced high are now moderating their premiums to gain market share, while those that priced low may be compensating for being a bit too optimistic. The overall story here is that insurers see the potential to gain market share and revenues. It’s a signal from insurance companies that they believe the law is here to stay and that the market is stable."
That last thought is important. Some conservatives predicted that dysfunction in the Affordable Care Act marketplaces would cause insurers to abandon them altogether, reducing competition and potentially undermining the entire program. Some insurance company officials hinted at the possibility. But nothing like that seems to be happening.
"There is no evidence yet of a premium death spiral in any state that the doomsayers had predicted, or a collapse of insurance markets as carriers exit," notes Sara Collins, vice president for Health Coverage and Access at the Commonwealth Fund. "Indeed in most states we are seeing the opposite. Moderate average increases, with some major decreases in rates in many states—like Michigan, New York, Oregon—and some major increases—Lousiana. And many flat. And an influx of new carriers in many states that had sat out last year."
Len Nichols, the George Mason University economist concurs. "I put the most credence in what insurers do, not what they say," he told me. "I see United [Healthcare] and others entering exchanges they avoided in 2014. .. This is a collective judgment that these markets are working, contradicting the cassandras once again. Rather loudly, actually. Actions don't lie, or spin."