High Deductibles Keep Obamacare Premiums in Check
Policy + Politics

High Deductibles Keep Obamacare Premiums in Check


Obamacare premiums might not soar sky high after all.

Despite some insurers’ dire warnings that premiums would significantly increase next year under the president’s health care law, a new study suggests that 2015 rates are only going to increase moderately — as they have in the past.

The Urban Institute and the Robert Wood Johnson Foundation released a joint analysis examining 2014 premiums for exchange policies in eight states. They found that each state had lower prices this year compared to similar products sold before the exchanges were implemented. The researchers credited competition and the mix of enrollees for keeping the price low and said they expect a similar outcome for 2015 rates.

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In Minneapolis, for example, premiums in small-group plans offered before Obamacare were, on average, $445.83 per month. On the exchanges, the average monthly premium for the cheapest silver plan was about $137.64 for a 27-year-old and $244.26 for a 50-year-old.

Though the researchers say some factors will lead to cost increases-including expanding provider networks—they say an expected uptick in enrollment next year, including among younger people, will help keep premiums from soaring.

“CBO projects an additional 7 million individuals will enroll in Marketplace plans in 2015. This is likely to assure an even more stable mix of risks available to insurers,” the authors said.

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The study also notes that most plans participating in the exchange marketplace this year are likely to continue next year, and others are expected to join.

“Large insurers that stayed out of many Marketplaces or bid at high premium rates—Aetna, United, Cigna—could enter more Marketplaces in 2015 and price more aggressively because of the higher enrollment and the perception of a more stable risk pool,” the researchers said, adding that “United and Blue Cross Blue Shield also plan to be more active in the Marketplace next year.

“How these scenarios will play out is hard to know, but claims that premiums will skyrocket are unwarranted based on 2014 experience and the evolving conditions for 2015 suggest otherwise as well,” the study said.

Of course, health experts caution that Obamacare is not a one-size fits all law and that premium rates tend to vary largely from region to region. For instance, smaller markets with just one or two providers will likely have plans with significantly higher premiums than in larger markets with more competition.

An earlier analysis from Kaiser Health News reviewed premium prices in each region of the country and found rates in rural Southern Georgia were an average $461 on the cheapest silver plan. In contrast, rates in Pittsburgh, which enjoys a large, competitive market, were an average $164 for a similar plan.

The study concludes, “There are several reasons to believe there could be significant premium increases in 2015, e.g., underpricing in 2014, increases in health care costs, and pressure to broaden networks. But the dominant force behind the surprisingly low premiums in 2014 remains intact—the strong incentives for markets to be highly competitive, which forces insurers to set premiums aggressively to attain or retain market share.

“These incentives should be even stronger in 2015 with increased enrollment and a more stable risk pool. High deductibles and narrow networks will continue to place downward pressure on spending. It also must be noted that it is not the increase in a particular insurer’s premiums that matters; rather it is the premiums of the second lowest cost silver plans in each market that matter and these should rise more slowly.”

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