Recent government data claims that 20 million Americans have gained healthcare coverage due to the Affordable Care Act. The Rand Corporation study in 2015, a Gallup poll in 2016, and the Department of Health and Human Service (HHS) report in 2016, all confirmed an average reduction of the uninsured population by approximately 16.9 million and a total of nearly 20 million people with new health plans since the law passed in 2010. These numbers include both adults and children. Each study states that the Affordable Care Act is directly responsible.
What About Premium Rates?
Rates are weighted using the second lowest cost Silver Plan. This baseline shows a five percent increase last year compared with a 10 percent increase this year, according to reports from the Kaiser Family Foundation (KFF). Next year is expected to increase as well, but the increase will still be about 15 percent less than the Congressional Budget Office (CBO) first projected when the law was passed in 2009.
Americans are getting familiar with the system and how the Obamacare marketplace works. They are better able to understand pricing comparisons, out-of-pocket and deductible costs, and anticipated subsidies. Premiums were expected to rise initially because insurers came in low to win market share knowing they would make adjustments later depending on enrollment results. In an article by Kevin Drum, A Closer Look Behind the Obamacare Surprise, he sums up the reports by saying,
“Although 2017 rates may come in at 10%+ higher this year, it’s still 15% below what CBO originally projected”.
In 2016, the average employee-based plan for individuals will cost $6,400 while family coverage is around $15,500 according to the CBO and the Joint Committee on Taxation (JCT). Then, in the period between 2016 and 2018, plans will increase at an average rate of about 8 percent per year. Following 2018, that changes to a 5 or 6 percent nationwide average and continues until 2025.
Currently, the average plan pricing for coverage purchased individually is lower than the average employment-based premiums, mostly because non-group plans have less coverage and require higher out-of-pocket costs at the time of service.
Health insurance premiums have been slowing compared to previous years when they have overtaken the economy and the average American income. From 2005 to 2014, premiums for employer-based coverage grew by 48 percent for an individual and by 55 percent for families. The average projected increase of about five percent annually for the next 10 years is only two percent over the national average income.
In 2014, the CBO and JCT determined an actual premium of $3,800 as the national average and, in a 2015 report, average premiums turned out to be about $4,000, subsequently increasing to $6,400 in 2016, and estimated to arrive at $10,000 in 2025. From 2016 to 2025, a total 60 percent increase is anticipated.
Keep in mind that employer-based coverage is exempt from federal and payroll taxes which translates to a subsidy that reduces the average premium by 30 percent in 2016. Tax credits applied to individual or non-group coverage is higher.
These subsidies reduce the portion of the entire premium that enrollees are required to pay and affect the total cost of the plan. They also boost enrollment of generally healthier people, reducing insurers’ average costs on health care and keeping premiums lower. Reduced premiums inspire employers and employees to select better coverage which can then raise average premiums. Overall, the average increase arrives at the 10 to 15 percent range.
Starting in 2020, a new excise tax on higher premium employer-based plans will take effect and offset the incentive to obtain more extensive coverage than the federal tax exclusion allows. Employers and employees affected may choose less expensive coverage than they had prior and average premiums should reduce again.
According to an article released by the HHS:
“… Americans with insurance through the Health Insurance Marketplace or through their employers have benefited from better coverage and a reduction in the growth in health care costs.”