For one thing, restrictions on how much more older people can be charged for health insurance means that younger people will pay more than they would under current arrangements. “A 27-year-old healthy male may see a 130 percent increase,” predicted one industry insider. Unisex rates, also mandated by the health reform law, mean that men will pay more. (Historically women paid more because on average they used more medical services.)
How much the increases will pinch the pocketbook also depends on which state people live in. Since one objective of Obamacare was to toughen regulation in the individual market, those who live in states like Ohio or Indiana—where regulators have used a softer approach to regulating—will see higher rates than those in New York and New England, where rates are already higher because of tougher state regulation. On the other side, meanwhile, an analysis for the New York Health Benefits Exchange predicts lower premiums for those buying in the individual market.
What insurers fear most is that swarms of sick people will buy their policies. The law requires that on January 1 they have to cover them no matter what diseases they have. How much these people will cost is something of an unknown at the moment. So carriers may be trying to take precautions now against pricing their coverage so low that it won’t be enough to pay claims of sick people, who will get coverage next year, and still make a profit.
Carriers also worry that some healthy people will buy bare bones policies in the exchanges—the bronze policies that are designed to cover just 60 percent of their medical expenses. And that then, when they do get sick, they’ll switch to a policy with richer benefits, like the gold or the platinum plans designed to cover 80 and 90 percent of the costs. For the companies, that could mean being on the hook for more of the expenses of people now needing lots of medical services. Premiums for these plans are, of course, higher, but still may be insufficient to cover the cost of claims from some very sick people. Some carriers are pricing their policies with this potential scenario in mind.
Then there are the fees and taxes Obamacare calls for to help pay the subsidies for the soon-to-be insured. The health insurance tax levied on all insurers will raise, cumulatively, $59 billion by 2018. Insurers see it as a huge cost, most likely passed on to employers in the form of higher premiums for their workers. Both insurers and small businesses are lobbying hard to get the tax repealed. There’s also a user fee tacked onto every policy sold in the new shopping exchanges, as well as a “reinsurance” fee aimed at covering the cost of care for very sick people. Mandated benefits, called essential benefits, will also add to the premium. For example, many policies now sold in the individual market do not have maternity coverage. After January 1, they will have to offer it.
These benefits—which give people better coverage—will add between 3 and 17 percent more to the premium depending on the carrier. It’s axiomatic in the insurance business that better benefits bring higher premiums. In other words, you get what you pay for. Obamacare effectively eliminates most of the limited benefits policies now on the market, (although loopholes in the law will still allow some policies offering few benefits to be sold).
Will policies be affordable?
When actuaries combine all these factors, some predict that some individuals will see increases higher than 100 percent. But note: that is before taking into account any premium subsidies called for by Obamacare. Some people will get help paying for their insurance.
The White House and Obamacare advocates argue that although premiums may be high, subsidies called for by the health reform law will make the overall premium more affordable and manageable. And that’s true, for about 60 percent of those 12 to 15 million people who buy their coverage in the individual market. Using US Census data, insurance experts estimate that proportion of customers in the individual market will get some government help to make their outlay “more affordable.” To be clear: that doesn’t mean their premiums won’t increase, just that those who get subsidies won’t have to pay the total cost.