As we inch closer to the third open enrollment period under the health reform law, people will naturally want to know how their premiums will be impacted. And brokers who sell individual health insurance policies will want to know how sell-able the plans will be this fall.
2016 premium rates were the subject of a Wall Street Journal article last week. The article sited the “huge requests” for premium increases next year, but we actually reached a different conclusion after reading the article.
The piece showed the average rate increases from major insurers in a dozen states and shows an example of 2015 vs. 2016 rates for a 40-year-old non-smoker purchasing a silver-level plan.
As you can see, some of the states included in the survey have very low rate increases – that’s good news. In others, the rates are in the single digits, which is certainly better than we’ve seen in years past. But in some, as the article suggests, the premium increases are rather large. Still, there’s no reason to be alarmed yet. First, carriers requesting premium increases in excess of 10% will be required to justify the increases to the Department of Health and Human Services and could be denied if they don’t have a sound argument. Second, the increases might be justified. If a carrier is experiencing losses and needs to increase its prices in order to continue offering coverage in the individual market, that’s the responsible thing to do – we’d much rather see higher-priced options than no options at all. And third, for people receiving a premium tax credit – about 87% of individuals and families enrolled through the Marketplace – the premium increase will be partially if not fully offset by an increase in the government subsidy. In fact, for people enrolled in individual plans, they could actually see their share of the premium go down as prices go up.
In the long run, we know that the government cannot continue to bear the brunt of these rate hikes – something will need to change in order for the premium tax credits to continue. But for this coming enrollment period, there’s really no reason for brokers or their prospective clients to worry, regardless of where they live. The net premiums people pay for coverage in the individual market will remain affordable for another year, and brokers who sell individual plans through private health insurance exchanges should see their income rise for the third year in a row.