Maggie Mahar: You probably have seen headlines like this one: “O-Care premiums to skyrocket.”
The warning, which was posted on The Hill, seemed designed to cheer conservatives distraught by Obamcare’s enrollment numbers. It began by announcing that next year, “premiums will double in some parts of the country. The sticker shock will likely bolster the GOP’s prospects in November and hamper ObamaCare insurance enrollment efforts in 2015.”
Where did the reporter get her information? The story is based on interviews with “health insurance officials.”
Why would they issue such dire predictions? Perhaps they are trying to soften us up so that when insurance rates rise by “only” 7% to 10%, we’ll be surprised and grateful? (This is just a thought.)
The truth is that there is absolutely no reason to believe the same old, same old, fear-mongers who claim that in 2015, rates will spiral “by 200% to 300%.”
But what about those who predict double-digit hikes? Wellpoint, the biggest commercial insurer in the Exchanges, recently told Bloomberg that it may ask for “double-digit plus” increases when it proposes 2015 rates sometime next month.
Wellpoint can propose whatever it wishes, but I very much doubt that state regulators would accept such stiff increases. A combination of regulation and competition will keep a lid on premiums both in the Exchanges, and off-Exchange, just as it did this year.
My guess is that, in most states, rates will rise by no more than 2% to 4%. Meanwhile, government subsidies will climb to cover those increases for most who buy policies inside the Exchanges. (This year 80% of those who purchased insurance in the state marketplaces received tax credits to help premiums.) Folks who purchase coverage off-Exchange won’t receive subsidies, but, by and large, carriers selling policies to individuals outside the government’s online marketplaces will have to compete with prices inside the Exchanges.
Why am I so optimistic?
The Underlying Cost of Medical Care Is Slowing
Americans have become so accustomed to hearing about “runaway health care inflation” that most do not realize that we have finally “broken the curve” of rising health care costs.
Granted, for most of this century, rates soared: “From 2000 to 2009, health insurance premiums climbed 84%,” Zeke Emanuel, a former White House healthcare adviser and author of Reinventing American Healthcare: How the Affordable Care Act Will Improve Our Terribly Complex, Blatantly Unjust, Outrageously Expensive, Grossly Inefficient, Error Prone System., recently told NBC’s “Meet the Press.”
By contrast, “for the past three years, health care cost growth has dramatically slowed and is just about even with growth in the economy. Some of this is due to lingering effects of the recession in 2008,” he added. “But a part of it is undoubtedly due to the ACA.”
Drew Altman, President of the Kaiser Family Foundation, points out that, despite the aging of the population, ”the Congressional Budget Office projects that Medicare will cost significantly less in the future than previously thought,in part because of the ACA’s changes to Medicare’s payments. “ (As I have explained, those cuts do not reduce benefits,but they do force hospitals to cut waste and provide better value for our Medicare dollars.
Both in the public sector and in the private sector, “Overall health spending is growing at the slowest rate in 50 years,” Altman observes, (dating back to when the government first started tabulating health expenditures.)”
“The key for the future is not to eradicate premium increases entirely,” Emanuel adds. The goal “is to make sure [that these increases] aren’t Excessive.” He stresses that there is still much to be done to rein in healthcare spending. But for the moment “the exchanges are stable,” says Emanuel. “Premiums are likely to rise a little but not excessively.”
If you don’t believe Emanuel and Altman, take a look at the graph below, comparing outlays for all medical services (the orange line) to the PCE (personal consumption expenditures–the blue line) from 2009 to 2014. As you can see annual spending on healthcare services is now growing by well under 1% a year. (For a larger version of the graph, click on the link above.)