Obamacare premiums rising in 2015, but not at 'death spiral' pace

Obamacare insurance rates for 2015 are coming into view, and they are (drum roll, please) generally not that bad.

This statement comes with some asterisks attached, notably that health insurance wasn’t cheap to begin with and that the rates for 2015 are still a work in progress.

But so far it looks as if premiums for policies purchased on Affordable Care Act marketplaces will go up for many Americans at a single-digit rather than double-digit pace.

One analysis released Wednesday, for example, finds an average premium increase of about 8 percent, to about $350 per month. That’s based on the rate requests that sellers have filed with insurance commissioners in nine states for high quality “silver” plans.

The question of rate hikes under the ACA is significant for reasons that go beyond family budgets. Critics of the law have warned that if the state marketplaces for buying insurance don’t get a broad demographic mix of enrollees, premiums would skyrocket as insurance firms struggle to keep their plans from losing money. The result, they warned, might be a “death spiral” in which soaring costs killed the marketplaces as venues where moderate-income people who lack insurance can buy it.

But if the death spiral scenario isn’t transpiring, that doesn’t mean the pricing of Obamacare is a non-story. Despite the law’s requirement that people have insurance coverage in 2014 or face possible tax penalties, many Americans remain uninsured – and in many cases high cost is the central reason they opted not to buy in.

Even in states where rate hikes for 2015 look modest, the rises won’t make coverage easier to afford. And it’s far from clear where rates will head in 2016 and beyond. Health care experts say some insurers are trying to keep rates low for now in a bid for market share on exchanges.

Still, the relatively modest rate changes for next year represent welcome news for health care consumers.

“For the most part, the sky has not fallen,” Cheryl Fish-Parcham of the health care advocacy group Families USA said in a press briefing last week.

She said premiums hikes are averaging in the single-digits in most states so far – and that state regulators may use the review process to restrain the size of rate increases. Reviews are just beginning for rates that will be in effect when people sign up for 2015 insurance plans starting in mid-November.

Here’s the newly compiled data on nine states, ranked from biggest to smallest rate increases for 2015, as released by the consulting firm Avalere Health on Wednesday:

Indiana. Average premium hike of 16 percent, to $394 per month.

Connecticut. Average premium hike of 12 percent, to $400 per month.

Vermont. Average premium hike of 11.6 percent, to $466 per month.

Washington. Average premium hike of 8.8 percent, to $331 per month.

Virginia. Average premium hike of 7.9 percent, to $313 per month.

Maine. Average premium hike of 6.1 percent, to $376 per month.          

Maryland. Average premium hike of 4.3 percent, to $289 per month.

Rhode Island. Average premium hike of 2.5 percent, to $309 per month.

Oregon. Average premium change is a decrease of 1.4 percent, to $272 per month.       

For all these states, the rates are for a 40-year-old nonsmoker choosing a silver plan. Premiums will be lower for some (younger people) and higher for others (older, smokers), but that’s a pretty good proxy for the average Obamacare customer.

Silver plans have been the most popular ones on the exchanges, combining solid coverage with lower deductibles than consumers face with bronze plans.

But “popular” hasn’t been the word most often associated with President Obama’s health care reforms. In public opinion polls, the law hasn’t won big support despite the fact that it allows people to get coverage regardless of preexisting conditions – and offers subsidies to help pay for it.

“The biggest consumer problem Obamacare has is that the plans – with their still high premiums even after the subsidy, big deductibles, and narrow networks – are not attractive to working class and middleclass families and individuals,” writes Bob Laszewski, a health insurance consultant and blogger on health policy.

​The backdrop for consumer frustration goes beyond Obamacare. One new study comparing the US with other advanced nations ranked America's health care system last among 11 countries, even as it has by far the highest costs.​

The numbers Avalere cites for each state are averages for a variety of plans offered by a variety of insurers. So if you’ve bought insurance on the Virginia exchange, don’t expect that your premium will rise by exactly 7.9 percent.

A few things stand out in the numbers:

• Cost varies a lot by state and region. Average premiums are a lot lower in Oregon ($272) than in Vermont ($466) or Connecticut ($400). Within a state, premiums can also vary a lot depending on whether you live in a big city, with more competition, or a rural area with limited choice.
• Premiums don’t show any pattern of convergence. If anything, rates in 2015 so far look set to rise more in states that already have high costs, while holding steadier in lower-cost Oregon, Rhode Island, and Maryland.
• Some of the biggest states are still to come. Stay tuned for news this summer from populous states like California and New York.

“The caution is for people not to jump to the conclusions ... not to make these broad generalizations,” says Elizabeth Carpenter, a director at Avalere in Washington. “The reality is there's a lot of uncertainty” about the climate for health costs.

For one thing, she notes, insurers still haven’t had lots of experience with claims by the 2014 pool of Obamacare enrollees. Many firms started filing their 2015 rates within weeks of finishing their 2014 enrollment.

Firms are “not flying as blind as they were” last year when setting rates, Ms. Carpenter says. But “there's still a large black hole to be got through.”