Andrew Herndon knew it was coming.
Herndon, a Charlotte, N.C. resident who has a health and life insurance license but works in sales, fully expected that his health insurance premiums would rise after the implementation of the Affordable Care Act (ACA). The only question was by how much.
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He recently learned in a letter that monthly premiums for his individual market plan, which also covers his wife and two kids, will increase to $810 next year, a $547 or 280 percent increase from his current plan, after the ACA’s health insurance exchanges begin offering coverage.
"I can’t pay $800 a month for insurance," he said in an interview with the Washington Free Beacon.
"Basically the government is making me choose between paying for my mortgage and buying food and paying for insurance," he said. "[My wife and I] are both in our 50’s. We have two children. We’re not going to have more children. We don’t need maternity. We don’t see the doctor that much. We don’t use medication."
"There’s no way we can pay that and live."
Herndon is not the only American facing higher premiums because of the ACA, commonly known as Obamacare. Premiums for plans in the exchanges will climb in 45 states compared to plans offered in the individual market before Obamacare’s implementation, according to a study released Wednesday by the Heritage Foundation. States like Arizona, Arkansas, Georgia, Kansas, and Vermont will see triple-digit percentage increases.
For example, premiums in Arkansas will soar by more than 170 percent to $285 per month for adults aged 27. Rates will also increase by 79 percent for adults aged 50 and 25 percent for a family of four.
Drew Gonshorowski, policy analyst at Heritage and author of the report, said at a Heritage event Wednesday that the surge in premiums can be attributed to a myriad of regulations, mandates, and taxes under Obamacare. Those include taxes on health insurers, benefit mandates, coverage of those with pre-existing conditions (also known as guaranteed issue) and community rating. Community rating requires that insurers charge no more than three times as much to their costliest plan holders, typically older, sicker people, than to their less-costly ones.
Obamacare mandates that everyone not already covered by a plan or a federal program must either enroll in the exchanges or pay a tax. Many young adults would save hundreds by not enrolling and paying the penalty, even with the availability of federal tax credits.
That poses a problem for the underlying logic of the exchanges, which are designed to share costs and lessen the burden on older, sicker patients, Gonshorowski said. If young people do not enroll, premiums will spike as older and costlier people fill the insurance pools—inducing fewer and fewer people to enroll and premiums to further escalate.
Health care experts call this "adverse selection" or a "death spiral."
The prospect of skyrocketing health care costs appears to contradict President Barack Obama’s claim in 2008 that his administration would lower premiums "by up to $2,500 for a typical family per year."
Additionally, experts say Obamacare will exacerbate trends in health care consolidation and access to services that will hit middle-income and poor Americans the hardest.
James Mills, assistant general counsel for the Oklahoma Insurance Department, said at the Heritage event that about one in five Oklahomans lack health insurance. He said Obamacare will affect the state’s entire insurance industry, increasing premiums by 58 percent for those aged 27 and 22 percent for those aged 50. The law will still leave 31 million people uninsured across the nation by 2023, according to the Congressional Budget Office’s latest projections.
Most importantly, increased coverage under Obamacare will put a strain on Oklahoma’s health care providers, particularly in rural areas, Mills said. Oklahoma, which Mills described as "not a particularly rich state," ranks 49th in the nation for resident access to primary care physicians and has about 80 primary care doctors per every 100,000 residents, he said. Many medical students in the state do not come back to rural areas after their residencies, he added.
"There’s a very drastic need for primary care physicians who want to work in rural areas where the reimbursements may be low," he said.
Rural areas nationwide lack about 20,000 primary care doctors, but only about 16,500 medical doctors graduate annually, according to the American Association of Medical Colleges.
Mills said that of the five insurers offering plans in Oklahoma’s exchange, two are Health Management Organizations (HMOs) that will not serve rural areas in the state due to new network requirements.
He added that a lot of hospitals in rural Oklahoma "are on the brink." Uncompensated care costs also might actually rise at hospitals, even though more people are insured, if they purchase plans in the exchange with low premiums but higher out-of-pocket costs they cannot afford.
Meanwhile, insurers have told other providers in Oklahoma that they will see an increase in volume size and revenues as a result of the shrinking networks. That might not be much of a consolation to them, Mills said.
"There’s a limit to how many people they can see," he said. "Either they can’t see people or the quality of care will go down."
The Free Beacon reported last month that Obamacare has accelerated layoffs and the elimination of services at hospitals across the country, partially due to annual Medicare reimbursement cuts. Those reductions could eventually lead to a quarter of all hospitals rejecting Medicare patients and the rationing of care.
Larry Patterson, president of the glass company Glass Doctor in Dallas, Texas, offered the perspective of a business owner at the Heritage event. Even though his company has provided health insurance options to its employees since 2003, he said premium increases of about 200 percent since 2010 will prompt him to no longer contribute to employees’ plans. He said he is also considering dropping coverage for his 30 employees entirely and pushing them onto the exchanges.
"These are real people. These guys work hard," he said. "They’re going to have to spend an hour or more a week in their wages for something that is too expensive that they don’t need."
"They’re not going to pick it up," he said. "Why are they going to pay more than $1000 a year to have a $3000 deductible?"
Herndon, the salesman from Charlotte, said he might forego insurance next year and pay the tax.
"For the middle class that are doing all the work in this country, this is going to kill us if we end up paying it," he said.
"It’s making a choice between food, clothes, paying the mortgage, and health care. And that’s not an easy decision."