The Obamacare Death Spiral Is Upon Us

Premiums to rise by as much as 145%, insurer participation plummeting

October 25, 2016

Health insurance premiums on Affordable Care Act marketplaces will rise by as much as 145 percent in some states next year as insurer participation continues to decline, according to a report from the Kaiser Family Foundation.

Premiums are set to increase faster next year than they have in past years due to the number of insurers experiencing losses and the phasing out of Obamacare's reinsurance program, according to the report.

Kaiser evaluated the cost of the second-lowest silver plan, one of law's most popular plans. Under this plan, a 40-year-old non-smoker making $30,000 a year will see his premium rise by double-digits in 33 states next year.

For example, in Phoenix, Arizona, premiums for this plan will increase from $207 per month in 2016 to $507 per month in 2017—an increase of 145 percent. In Birmingham, Alabama, premiums will increase from $288 to $492, an increase of 71 percent. In Oklahoma City, premiums will rise from $295 to $493—up 67 percent.

Only three cities—Indianapolis, Indiana, Cleveland, Ohio, and Providence, Rhode Island—will benefit from premium decreases in 2017.

"Nationwide, average Marketplace premiums for 2017 are increasing more than they have in the past two years," the Obama administration announced yesterday. "For the median consumer, the benchmark second-lowest silver plan premium is increasing by 16 percent this year, before taking into account the effects of financial assistance."

In addition to increasing premium costs, Kaiser finds that insurer participation will decline further next year.

"As a result of losses in this market, some insurers like UnitedHealth and Aetna have announced their withdrawal from the ACA marketplaces or the individual market in some states," the report states. "In states that use, the average number of insurers participating in the marketplace will be 3.9 in 2017 (down from 5.4 companies per state in 2016, 5.9 in 2015 and 4.5 in 2014)."

Five states—Alabama, Alaska, Oklahoma, South Carolina and Wyoming—will have only one insurer participating in their exchanges next year. The report did not include insurer information for 12 states because data was not available.

"Before the ACA, many consumers were unable to get health coverage at all, and the individual market offered no easy way to shop and compare plans," said Kevin Counihan, CEO of the Health Insurance Marketplace. "Because of the Marketplace, consumers can shop around to find coverage that fits their needs and get tax credits to help pay for it. Thanks to shopping and financial assistance, consumers will continue to have robust options for quality, affordable coverage for 2017, even in places where premium increases are high."

Brian Blase, a health care scholar at the Mercatus Center, said that despite large subsidies insurers have still suffered huge losses selling Obamacare plans.

"Young and healthy people are largely shunning the coverage with many gaming the new rules to enroll only when in need of expensive services," Blase said. "These huge premium increases and widespread insurer exits further demonstrate the law’s exchange program is destabilizing the individual market for insurance."

"This steep rise in premiums was predictable, because ObamaCare was at odds with the very concept of insurance by requiring insurers to cover preexisting conditions, which is like insuring a car after it crashes," said Blaine Winship, the lead trial counsel who challenged the constitutionality of Obamacare.

"ObamaCare also drove up insurance costs by requiring that coverage be expanded to include many features that many persons would not want," he said. "By jacking up the demands on insurers, and offering huge subsidies to low-income persons, ObamaCare is another massive redistribution of wealth scheme that will punish the middle class."

Update 1:00 P.M.: This post has been updated to reflect comment from Blaine Winship.

Published under: Health Care , Obamacare