Sunday, July 12, 2015

ObamaCare's Unbalanced Risk Pools

Health insurance companies are signaling huge health insurance premium increases ahead of the 2016 open enrollment period. This is due to the droves of older and sicker consumers who signed up for coverage on the ObamaCare Exchanges, according to a report from The New York Times.


Rate increases vary by state and health plans offered. Oregon has already announced premium increases between 8 percent and nearly 38 percent for a 40-year-old on a Silver plan purchased through the federal Exchange. The Times notes that Blue Cross and Blue Shield, which dominates the market in a number of states, is seeking premium increases for its plans that "average 23 percent in Illinois, 25 percent in North Carolina, 31 percent in Oklahoma, 36 percent in Tennessee and 54 percent in Minnesota. While the initial rate shock under ObamaCare came from the mandated benefits promulgated by bureaucrats in Washington, taxes and fees, and actuarial benefit requirements, the latest round of premium increases can be partially attributed to unbalanced risk pools. The risk pools have older and sicker enrollees, who utilize their coverage more often than younger and healthier enrollees, than insurers expected. 

Typically, state insurance regulators negotiate with insurers to bring down the requested rate increases. But with ObamaCare's requirement that 80 percent of premiums paid go to the healthcare of the insured, insurers, particularly those that have seen losses due to the higher utilization of care, may not have much of a choice other than to raise premiums to keep their reserves stable. It may not be ideal for consumers, who may have to change plans and risk losing their doctor because of premium increases, but this is the new normal under ObamaCare.
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