Thursday, April 7, 2016

Two Reasons Obamacare Premiums Will Spike In 2017

By Coleen Elkins         24-7healthinsurance

In March of 2010 when the Affordable Care Act became law government financial assistance was promised to the health insurers. This was to guarantee the insurers they would not lose money insuring American's without underwriting them.

The assistance is referred to as the "3R's".  They are Risk Adjustment, Reinsurance, Risk Corridors. The 2014 Kaiser Foundation Table below explains the functionality of each program.

A 2015 article from "The Hill" explains the financial health of reinsurance this way. "Nearly all of the 484 health insurers that paid into the pool will be receiving some money back. About 50 plans did not qualify. With the extra money from 2014, health companies can now split a $1.8 billion pool of reinsurance money through 2016". 

Both the Reinsurance and Risk Corridor Program end at on December 31st 2016. These two programs were designed to stabilize health insurance premiums along with Risk Adjustment which will remain. This means moving forward in 2017 plans that experience lower claim payments will have to pay money to those that have experienced higher claims. This will be the only stabilizing force for insurance premiums.

To put numbers into perspective in 2010 a female in their mid 50's paid premiums under $200 per month for a $5000 deductible PPO with nationwide coverage in the state of Texas. Six years later a $5000 deductible PPO plan with limited coverage outside the service area will cost over $600.00 per month for the same 50 year old female without a government subsidy.

Reading the above paragraph makes it clear health insurance premiums will not go down in the future. What remains to be seen is how much the health insurance premiums will rise in 2017.  Will health insurers be financially solvent without the Reinsurance and Risk Corridor Programs?