Many factors drive the price of health insurance premiums -- some down but, unfortunately, most up.
Expect to pay more for health insurance in 2017, analysts say. But if you’re buying insurance through Obamacare, the increase should be modest.
“There are both upward and downward pressures on premiums for 2017, but for the individual and small group markets as a whole, the factors driving premium increases dominate,” said American Academy of Actuaries’ Senior Health Fellow Cori Uccello.
The academy this week issued its report called “Drivers of 2017 Health Insurance Premium Changes.”
Another group that studies health insurance drew similar conclusions for those who buy coverage through the Affordable Care Act’s federal and state marketplaces.
“It’s not surprising that premium increases may be higher in 2017 as the market matures and more data become available to insurers,” says a Kaiser Family Foundation report.
The reports are coming out as state insurance departments begin reviewing insurance companies’ proposed rates for 2017. This year, premiums for a benchmark silver plan rose by a little more than 7 percent on average, according to administration figures.
Insurance companies are more experienced now that Obamacare has been in place a few years, the Kaiser foundation notes. Participation in the new marketplaces grew fairly rapidly in the first two years of the program, but slowed in 2016, it said. By the end of the 2014 open enrollment period, 8 million people made a plan selection; by the 2015 period’s end, 11.7 million; and by the end of the 2016 period, 12.7 million.
What’s putting upward pressure on premiums that consumers will feel, according to the reports:
- Aging up: All insurers use a prescribed curve when determining how to vary premiums by age. In other words, say the actuaries, premium variations by age are the same regardless of insurer. Most individual consumers over age 24 will experience a premium increase each year of 2 percent to 3 percent due to getting older.
- Increasing health care costs: Although increases in health care spending are still relatively low compared with historic averages, prescription drug spending is expected to increase more rapidly than other medical spending.
- Reinsurance program ends: Each year since the start of Obamacare the gradual reduction in the reinsurance program has resulted in a corresponding increase in premiums. The reinsurance program assessed all health insurance payers and distributed the proceeds to insurers with individual enrollees with high medical expenses. Insurance companies are expected to seek rate hikes of 4 percent to 7 percent to make up for the loss of reinsurance funds.
- Enrollee pool changes: If experience regarding enrollment levels, risk profiles or claims differ from what insurers expected when developing 2016 premiums, they will revise premiums accordingly. Insurers that expected higher enrollment in 2016 than what actually occurred might need to adjust their assumed average costs upward for 2017.
- Risk changes: Insurers tended to price their initial coverage too low in an attempt to grab new business. Many new customers were sicker than expected, and now they don’t want to undercharge.
What’s putting downward pressure on premiums:
- Provider fee: A one-year moratorium for 2017 on the ACA health insurance provider fee, which is expected to collect $11.3 billion this year, could lower premiums by about 1 to 3 percent.
- Plan switching: A recent Department of Health and Human Services report showed that shopping for new health insurance plans is quite common and can lead to substantial savings for enrollees, Kaiser notes. For 2016, 43 percent of marketplace enrollees switched plans during open enrollment, saving on average $43 per month.
Among other factors affecting your potential rate changes include changes in your family size, changes in your income and changes in where you live. Insurance companies also vary the sizes of their provider networks — which doctors, hospitals and others are considered “in network” — and those with the broadest provider networks generally charging higher premiums.
What are your expectations for health care insurance rates for 2017? Share your thoughts in comments below or on our Facebook page.