An increase in health insurance premiums for plans sold on Maryland's ObamaCare exchange is the subject of a Washington Post dispatch that does a fine job of illustrating some of the problems of the Patient Protection and Affordable Care Act. The Post reports:
The price of the most popular health plans sold through Maryland's insurance exchange will jump, on average, by about one quarter next year, fueling questions about whether coverage under the Affordable Care Act will remain affordable in the state and elsewhere.
The 26 percent average increase in monthly premiums are for CareFirst plans, which cover three-fourths of the state residents who have bought insurance under the federal health-care law. ...The rates for 2016 are of keen interest to supporters and detractors of the law. For the past two rounds, insurers were partly guessing about how much to charge, since they had not yet had an entire year to gauge how much medical care their new customers in the exchanges would actually use. Around the country, the rates that insurers proposed for next year are the first grounded in concrete knowledge of their costs....Florida's insurance regulators announced last week an average 9.5 percent increase in insurance premiums for its exchange's plans. California's marketplace has said the average increase there will be 4 percent.
The state's insurance commissioner told the Post that:
CareFirst deserves to be able to charge more for 2016 because it has lost $100 million this year on individual insurance policies. That loss, he said, is partly because 7,800 small businesses around the state have decided to stop offering insurance to their workers, sending them into the exchange, where premiums were less expensive.
Michael P. Sullivan, a spokesman for CareFirst, said that, once the company had a full year of experience with the exchange, it turned out that "people who are in that pool in Maryland are, in fact, older and sicker than we expected them to be."
Taxpayers will pick up the cost of at least some of the increase:
Benjamin Wakana, a spokesman for the federal Department of Health and Human Services... pointed out that more than eight in 10 people insured through the exchanges get federal subsidies to help pay for their coverage.
"Discussing rates without discussing financial assistance does not reflect reality," he said.
The Post article doesn't get into the question of whether the rate increases will be large enough to make the insurance premiums qualify for the "Cadillac tax" of 40% that goes into effect in 2018 on employer-sponsored plans that cost more than $10,200 a year for individuals or $27,500 for families.
Maybe other states will have different experiences than Maryland or Florida. At the end of the day, though, it will be interesting to see whether Peter Orszag's pitch for ObamaCare as a long-term deficit-reducer turns out to accord with reality. Mr. Orszag was dealing with ten year projections, so by the time we find out for sure if he's wrong, President Obama will have joined him in the private sector.
You'd think Republicans might be able to make a winning political issue out of health insurance rate increases of 9.5% or 26% a year. Doubtless the Democrats will try to find a way to blame the insurance companies rather than the law that governs their operations. In any event this will be one to watch as other states and other insurance companies set their rates for 2016.
