How to Cope with Health Insurance Cost Increases
When you’re preparing your personal budget for 2017, you might want to factor in extra money for health insurance premiums.
A study by the Kaiser Family Foundation found that premiums for individual coverage on the Affordable Care Act (ACA) Marketplace could increase as much as 9 percent next year. Premiums typically increase each year, but that’s still 7 percent higher than last year’s increase.
Kaiser reviewed proposed insurance rates in 17 major cities and focused on the popular Silver health insurance plan, the second-lowest-cost available on the Marketplace. The Silver plan is used as the benchmark to calculate subsidies for low-income individuals.
While some proposed rate increases were as high as 27 percent and some as low as 6 percent, depending on location, 9 percent was the norm. Kaiser points to a number of factors for the increase — many of which are tied to the ACA.
Reasons for the Increase
Miscalculations: Some insurance companies miscalculated how much money they would need to cover health insurance claims. These companies either got out of the business or increased premiums.
Lower-Cost Options: In order to attract buyers in the early years of the Marketplace, many companies deliberately underpriced their plans. Many experts believe that rates now are going back to more normal levels.
Reduced Competition: Many insurers are finding it difficult to make a profit under the ACA regulations, which increase the types of coverages insurers must provide and prohibit insurers from excluding individuals based on their health status. As a result, some are leaving the market, which reduces competition and could lead to even higher premiums.
Mandate Not Working: Some observers believe that the ACA mandate, which requires nearly all Americans to have at least a minimum amount of health insurance coverage, is not bringing in enough young, healthy individuals. Premiums for this group subsidize the cost of covering other groups with higher claim costs. Many younger people are willing to pay the fine and take the risk they won’t need coverage. To make up for the loss of their premiums, insurance companies raise rates.
Expiration of the Reinsurance Program: The Transitional Reinsurance Fee is a three-year charge on health insurance premiums that expires in 2016. The fee, which is levied on employers and insurers, created a fund designed to stabilize premiums in the Marketplace and help insurers pay the costs of covering extremely ill patients. Insurers are expected to increase rates by four percent to make up for the loss of this funding.
Higher Costs: Medical care costs increase annually, but experts expect them to be higher than normal due to the escalating costs of producing new specialty drugs, increases in hospital prices, and the cost of technologically complex treatments.
How to Save Money on Premiums
It pays to shop around. Not every company or plan charges the same premiums. Plus, you can affect the cost of your monthly premiums by choosing higher deductibles and increased out-of-pocket expenses. If you go with a different insurer, you might be able to lower costs, but keep in mind that you might have to switch doctors.
If you receive federal subsidies for health insurance you purchase on the ACA marketplace, you’re in luck. Many experts believe that individuals who receive subsidized health insurance will not be affected by the increases. The formula the government uses to determine the subsidies should offset any increase in rates.
What the Future Holds
No one knows for certain how much insurance prices will increase next year — on the Exchange or through private insurers. State insurance regulators might not approve high rate increases for Exchange policies, although they’re not likely to insist on rates that are so low that insurance companies go out of business. On the other hand, if the higher premiums take effect, healthier individuals might drop their coverage, which could increase premiums. The bottom line when preparing next year’s budget? Be prepared for higher rates on the Marketplace Exchange and with private insurers, and shop, shop, shop around. We can help you shop for health insurance plans, both on and off the Marketplace, at no extra cost to you. Please call us for an appointment.
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