Most of what you hear about the Affordable Care Act is complaints about higher premiums and predictions of the end of the law. Some reports are as high as 37 percent for 2017 which fuel an impetus for repealing the law.
The Affordable Care Act, also known as Obamacare, is a United States federal statute signed into law by the president in March 2010. According to PBS, about 44 million people have no health insurance, and another 38 million have inadequate health insurance. The purpose of the law was to “provide affordable, quality healthcare for all Americans and reduce the growth in health care spending, and for other purposes.”
However, the media reports indicate that health insurance companies are planning to make premiums skyrocket. An Associated Press article stated, “The health law has been a financial drain for many companies. They’re setting the stage for 2017 hikes that could reach well into the double digits, in some cases.”
However, the New England Journal of Medicine argued that these predictions are overblown. First, the predictions are too early. Many of the premiums will be reduced. If the premium is set to be increased over 10 percent, they will need to make their case to the government for why the premium should be increased. Some of these requests will not be accepted, and the premiums will have to be reduced.
The second reason the NEJM article states is that customers can change their insurance plans. If the rate is too high, they can change it to a lower rate. When taking this into account, the average premium cost will be much lower.
The third reason stated that more than 80 percent of people purchasing these plans qualify for the Affordable Care Act’s tax credits. If the person’s tax credit is capped at four percent of his or her income, the increase will be absorbed mostly by the tax credit. However, this will increase the cost to the government for the Affordable Care Act, increasing overall cost of the law.
In 2015, the media predicted a much higher rate increase for 2016 than what actually happened. Predictions from CNN were at 60 percent. The actual rate increase was 8 percent in 38 states using healthcare.gov and 4 percent among the customers getting tax credits, which was 85 percent. The same happened in 2014 where predictions of rate increases were much higher than the actual rate increase, which was just .03 percent in silver plans, the second lowest cost plan.
Before the Affordable Care Act, in 2008 to 2010, the growth of rates was actually much higher than in 2015 and 2016 under Obamacare coverage. In fact, the law states that “it reduces premium costs for millions of working families and small businesses by providing hundreds of billions of dollars in tax relief – the largest middle class tax cut for healthcare in history.” Covered California, California’s health care marketplace, announced premiums increasing an average of 13.2 percent. But, even if the rates increase that much, they will still be lower than the premiums in the absence of the law, according to the Brookings Institution.
However, there is some evidence to support the predictions of higher rates of coverage. Two of the safeguards against higher rates will expire in 2016. Also, the country is emerging from the Great Recession, which may cause increased rates of coverage.
So, yes, some consumers may face increases in rates well above the average. An increase in rates could reduce enrollment and limit the law’s potential effectiveness. We won’t know for sure until next year what the rates will be, but, based on the past, people will predict much higher rates than the actual ones.