Today I want to address the soaring costs of healthcare, which are rising far more than the Obama administration and the Department of Health and Human Services will admit. While I personally don’t consider healthcare costs to be a political issue, many argue that it is indeed a political issue with regard to “Obamacare.”
When talking to friends and colleagues, the most frequent comment I get is something like: Obamacare health insurance premiums are much higher than the government says they are – what gives? Today, I will answer that question with some new facts from an independent non-profit on healthcare premiums around the country. Prepare to be surprised.
The Administration’s Health and Human Services Department (HHS) announced on January 21 that healthcare premiums on the Affordable Care Act exchanges rose an average of only 9% from 2015 to 2016. That was highly misleading since the HHS data covered less than half of all consumers buying healthcare on the federal exchanges in the last year.
The real premium increases, almost across-the-board, are substantially higher in most states this year. A new, independent report from the Freedom Partners Chamber of Commerce includes the weighted-average premiums for all plans available on the Affordable Care Act’s exchanges.
The findings will shock you, or maybe not, if you have recently renewed your healthcare coverage. In that case, you may already know, especially depending on where you live. In any event, that’s what we’ll talk about today.
Runaway Healthcare Costs
On January 21, the Department of Health and Human Services (HHS) announced that health insurance premiums on the Affordable Care Act exchanges rose an average of only 9% from 2015 to 2016. Yet the HHS data account for less than half of individual consumers buying coverage in the 38 states using the federal exchange.
The overall premium increases were significantly higher.
Freedom Partners Chamber of Commerce, a non-profit organization, has analyzed all publicly available information for health insurance premiums from healthcare.gov and state insurance departments.
It then calculated the weighted-averages for all health insurance plans available on the Affordable Care Act’s exchanges. The weighted-average gives a more accurate view of overall premium increases, because it takes into account each insurance plan’s market share.
The findings: Nationally, premiums for individual health plans increased on average between 2015 and 2016 by 14.9%.
Consumers in every state except Mississippi faced increased premiums, and in no fewer than 29 states the average increases were in the double digits. For a third of states, the average premiums rose 20% or more.
Health-insurance premiums rose by more than 30% in Alaska and Hawaii; Oregon’s average rate increase was 23.2%. Consumers in Kansas, Missouri, Iowa and Illinois faced increases exceeding 20% on average.
The East Coast north of Maryland was the least hard hit (New York’s average premium increase was 6%), although Pennsylvania and New Jersey consumers faced premium increases of 14.6% and 13.1% respectively.
In 11 of the 16 states defined as southern by the US Census Bureau, premiums rose by more than 10%. Premiums rose on average by 13.9%, and by more than 20% in West Virginia, Alabama, North Carolina and Oklahoma. In Texas, where data was only available for 98.5% of individual-market healthcare plans, premiums rose by 14.1%.
Average premiums in Tennessee rose 35.2% – mostly because of the state’s largest individual market insurer, BlueCross BlueShield of Tennessee, which sold 82% of all exchange plans in 2015. After losing $141 million on these plans last year, the company had little choice but to request average premium increases of 36.3%. The state insurance commission largely approved this request, lest the company leave the exchange altogether and leave 231,000 Tennesseans in the lurch.
Minnesota holds the dubious honor of having the highest year-over-year premium increases, 47.7%. Why? Because that state’s BlueCross BlueShield, the largest insurer, with over 90% of the market, lost tens of millions of dollars during the Affordable Care Act’s first two years. The company requested an average 49% rate increase, which was largely approved by state regulators.
Remember: These premium increases are only one piece of the health-care cost puzzle. Deductibles are also rising under the Affordable Care Act. Silver plans – the most popular on the exchanges – have average deductibles of nearly $3,000 in 2016, according to the Robert Wood Johnson Foundation. This represents an 8% increase over last year.
Millions of Americans are coming to believe that the Affordable Care Act’s costs far outweigh its benefits. In 2014, the latest year for which data is available, roughly 7.5 million Americans paid the IRS penalty rather than purchase the law’s insurance.
This penalty is rising to an average $969 per household in 2016 in an attempt to force people onto the exchanges. Yet even a $1,000 fine is cheap compared to thousands of dollars more for an Affordable Care Act-compliant plan with a large deductible.
Gary D. Halbert is the president and chairman of Halbert Wealth Management, Inc. His Forecasts & Trends Weekly E-Letter may be obtained free of charge by subscribing at www.halbertwealth.com