Have you heard the scary and shocking news? In 2016, health insurers are looking to dramatically hike insurance premiums for plans sold through the Affordable Care Act’s federally facilitated marketplaces. That, at least, is the takeaway from stories published by Fox News, The Hill, and other outlets reporting on preliminary data on the ACA released by the White House recently. Conservative news outlets jumped on the news as proof that the Affordable Care Act is failing to live up to the promise of its name. John Boehner’s office rounded up literally every scary headline about Obamacare premium hikes to claim that the law “is set to deliver an even bigger blow to working families next year.” It’s a huge scandal! Obamacare is failing! The lies are finally being exposed! And so forth.
If this all sounds familiar, it should. We went through this exact same rigmarole last year. Early in 2014, health insurers started making noise about how they were going to have to jack up premiums for 2015, and the press wrung its hands over whether Obamacare was working while conservatives spiked the ball on their own 40 yard line. It didn’t matter that people were still signing up for coverage at that point, it didn’t matter that insurers didn’t actually know what the post-enrollment insurance market would look like, and it didn’t matter that premium changes would vary wildly from market to market. The Hill ran a story claiming that Obamacare premiums would “skyrocket,” citing guesswork from anonymous insurance officials and one former insurance executive’s “gut” feeling that “these increases will be significant.” When 2014 came to an end, the reality ended up being very different.
That experience should have taught us not to put too much faith in early data and not to implicitly trust health insurers -- but here we are again. It’s true that the data released by the Obama administration show health insurers requesting some fairly steep rate hikes for 2016. But these data are open to wild misinterpretation. First of all, the new data from the administration only cover insurers who requested premium increases above 10 percent. Attempting to draw any firm conclusions from those numbers is, as the Kaiser Family Foundation’s Larry Levitt told the New York Times, “like measuring the average height of the public by looking at NBA players.”
And as ACA statistics whiz Charles Gaba explained last month, there are several other factors at play that undermine the annual political freakout over Obamacare rate hikes. One of the most significant is the fact that we’re talking about requested rate increases, not actual rate hikes. These requests are subject to approval from state insurance regulators, who can deny them outright or force insurers to accept a far smaller increase. The gulf between the requested increase and what ultimately gets approved can be vast, as Gaba notes:
The difference this factor makes can be striking. Here’s what really happened in Rhode Island last year, where BCBSRI had a virtual lock on the market in 2014 (98 percent): They asked for an 8.9 percent rate hike but were only approved for 4.5 percent. That’s right: Their rate spike was slashed in half.
Connecticut was even more dramatic: The requested increase was around 12.8 percent; the approved increase was just 3.1 percent.
None of this means that insurance premiums in certain areas won’t go up or even spike here and there, but there’s little reason to think that will be the norm. “So far there's really no evidence that the demographics of the Obamacare population are very different from what the companies expected,” notes Kevin Drum. “Nor are companies dropping out of Obamacare. In fact, in most states competition is increasing. All that suggests that Obamacare premiums will rise at a fairly normal rate next year.”
Of course, there’s one huge variable out there that could render all of this analysis moot: the Supreme Court. If the court sides with conservatives in King v. Burwell and rules that the ACA’s subsidies for purchasing health insurance on the federal marketplace are illegal, then the nightmarishly high premium increases conservatives keep predicting will actually come to pass. (Republicans insist they’ll be ready to prevent something like this from happening, but they’ve shown zero progress on that front and not many people actually believe they’re up to the task.) Cutting off the subsidies means that healthy people who can no longer afford their premiums will drop their coverage, leaving the market full of sick people in need of medical care. Insurers will be forced to raise rates dramatically – close to 50 percent, according to one study.
That’s a consequence of a court ruling that Republicans and conservatives are actively rooting for. They want the ACA to be blown up by the court, which would throw the insurance markets into turmoil and introduce the real possibility of skyrocketing premiums. It’s something to keep in mind the next time you see them freak out over an insurer requesting a comparatively measly 15 percent rate hike.