You can almost set your watch by it: Every year, when new premium rates for the Affordable Care Act exchange plans are published by the government, critics proclaim that the law has failed Americans by failing to rein in prices. This year, the cries are sure to be even louder, because premium increases nationwide are averaging about 25%.
That’s the average in the benchmark silver plan (the second-cheapest silver plan in any region) for states using the federal healthcare.gov marketplace, according to government figures released Monday. The benchmark plan is the one on which the premium subsidies available to the vast majority — 84% — of Americans who purchase their insurance on the ACA exchanges are based. In fact, the average 40-year-old non-smoker earning $30,000 a year — a typical subsidy-eligible insurance buyer — will face no premium increase at all for the benchmark plan, according to the Kaiser Family Foundation. Some will even have lower costs.
But to capture those savings, they may have to switch plans. There’s the rub; it’s an element of Obamacare that has turned the yearly open-enrollment period into an annual chore for many people. Open enrollment runs from Nov. 1 to Dec. 15 this year for coverage to start on Jan. 1.
These details underscore why so many Americans are skeptical about Obamacare, if not downright dissatisfied, and why the program’s critics, chiefly Republicans, are still claiming that Americans’ lives will be improved if it’s repealed.
They’re wrong. Let’s take a closer look at the premium spike to see why.
This year’s premium increases have contributed to the impression that the ACA has failed to stem the rise in healthcare costs, and even contributed to a quickening of price hikes. Insurance customers also blame the law for rising deductibles, which can make medical treatment hard to afford even for those with coverage.
Healthcare experts have been forecasting a premium spike of 25% or so for some time. That’s partially because insurers, uncertain about the characteristics of the ACA exchange buyer but eager to capture a decent share of the market, underpriced their policies in the first two years of exchange enrollment, 2014 and 2015. Some also faced a population of new enrollees who were sicker than they anticipated, or who packed years of personal deferred medical maintenance into the first few months of new coverage.
The mismatch of costs and revenues sent some insurers screaming into the hills, notably United Health Group, which had little prior experience in the individual market and didn’t have the stomach to wait out a shakedown experience. In 2017, United Health will be exiting most ACA markets where it had participated.
Yet even the 2017 hikes will place premiums close to where experts predicted they would be at this stage. In November 2009, the Congressional Budget Office projected that single coverage premiums for a benchmark silver plan would average $5,200 in 2016. The average for those plans in states using the federal healthcare.gov exchange will be $5,586 next year, in line with the CBO’s annual projected growth rate.
By some measures,, 2017 premiums will be lower than they might have been without the ACA, even after the price spike. That was the conclusion of Loren Adler and Paul Ginsburg of the Brookings Institution, who reckoned that rates came in so low in the first years of the ACA exchanges that even with a 25% hike, they haven’t caught up to the pre-ACA trendline.
Moreover, the ACA does appear to have helped reduce overall expenditures on healthcare. According to a recent study by the Urban Institute, while Americans will be spending more in 2020 than they are now, the rate of increase looks to be significantly slower than anyone expected. In raw numbers, the new expectation is that 2020 spending will come to about $4 trillion, compared to the $4.6 trillion projected at the time of the act’s enactment.
The slowdown’s impact can be seen in rates for employer-sponsored insurance, which is the coverage source for 153 million people, or nearly half the U.S. population. This year, the average family premium rose 3% compared to 2015, while the increase for single coverage was barely noticeable.
That hasn’t kept many workers from feeling squeezed by higher costs, and blaming Obamacare for the pain. But what’s really happening is that employers are shifting a larger share of their healthcare costs to their employees. The trend isn’t related to Obamacare, but reflects the same impulse by employers to shift costs that also has produced the demise of defined benefit pensions and the disappearance of annual raises in many industries.
The Kaiser Family Foundation’s annual survey of employer coverage documents this history. Since 2006, premiums for employer-paid family coverage have increased by a total of 58% — but worker contributions have risen 78%. Much of this shift has been achieved by raising deductibles on employer coverage: The foundation found that deductibles have been on the rise since at least 2006, four years before enactment of the ACA, with 51% of all covered workers facing deductibles of $1,000 or more this year, compared to only 10% in 2006.
This shows that many trends commonly based on Obamacare are artifacts of the American healthcare system that remain outside the law’s reach.
That brings us back to ACA exchange premiums, which certainly fall within the law’s jurisdiction. The rates cited by the Department of Health and Human Services on Monday show immense regional variations, ranging from a leap of 145% in Phoenix for a 27-year-old to a reduction of 12% in Indianapolis. These are pre-subsidy figures, so most exchange customers won’t be hit with major increases. The department also calculates that 76% of all enrollees in healthcare.gov states could save money by switching plans.
Beyond that, it’s hard to put one’s finger on a single explanation for the geographic variations. A reduction in competition seems to play a large role — the number of insurance providers in Phoenix will fall from eight this year to only one next year. In Indianapolis, two insurers are exiting but four remain, evidently enough for competition to thrive.
For all that, the coming rate hike does point to aspects of the ACA that need fixing, but that’s not news for its supporters. On the presidential campaign trail, Democrat Hillary Clinton has advocated extending and expanding ACA tax subsidies so they cover more families and help more with deductibles and co-pays. She also pledges as president to press the last 19 states still resisting the program’s Medicaid expansion to join in, which would provide coverage to more low-income residents and take some pressure off exchange insurers. Republican Donald Trump, by contrast, advocates repealing the ACA, but hasn’t offered a coherent plan to replace it.
The outcry over the 2017 premium increases won’t help move Republicans and Democrats closer to an accord on fixing what still needs to be fixed in Obamacare. In part because it obscures the program’s successes — bringing coverage to 20 million Americans who couldn’t obtain it before, reducing the growth rate in healthcare costs, and protecting millions of Americans from the abuses and inequities imposed before the ACA by insurers operating in a market without consumer protections.
Obamacare, as Jonathan Chait observes in New York Magazine, remains “a policy triumph and a political failure.” The triumph can be extended by Congress, if it wishes; the failure may be with us for some time to come.