Bacon's Rebellion

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Health Insurance Rates Up 16% Next Year

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by

James A. Bacon
in ,

obamacare

The Affordable Care Act isn’t looking so affordable. Health insurance plans in the Affordable Care Act’s Virginia marketplace could increase in cost by an average of 16% next year, reports the Richmond Times-Dispatch. The numbers are based upon rate changes that insurers have submitted to the Bureau of Insurance ahead of a State Corporation Commission hearing.

The increases are roughly in line with the 11% average increase expected nationally based on a Kaiser Foundation survey of 14 major cities. Richmond, one of the cities surveyed, actually fares better than the state and national averages with an increase of benchmark silver plans of only 6%. Presumably, other parts of the commonwealth are faring worse.

What’s going on? In a word, adverse selection. Sick people who anticipate big medical bills are signing up while healthier people are paying the penalties (or taxes, depending upon your legal context) for not participating and then enrolling when they need the coverage.

Or as Doug Gray, executive director of the Virginia Association of Health Plans, put it to Katie Demeria with the T-D: “The problem is we haven’t gotten all the healthy people, but we have gotten most of the sick people.”

The problem was widely anticipated. Indeed, the Affordable Care Act attempted to forestall adverse selection by imposing penalties/taxes on uninsured Americans who declined to enroll. But it turns out that the incentives were not harsh enough. (It would be interesting to know how aggressively the Obama administration is enforcing the provision — strict enforcement could create a political backlash.)

Obamacare advocates said that other provisions in the legislation would keep costs under control. They don’t appear to be working. The big question now is whether the Affordable Care Act is in a death spiral — and what comes after it collapses. Does Virginia have an answer?

— JAB

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8 responses to “Health Insurance Rates Up 16% Next Year”

  1. LarrytheG Avatar
    LarrytheG

    First off – non-ObamaCare health insurance costs have been going up all along for a decade or more – so it’s not just ObamaCare.

    Second – the penalities next year are harsh indeed – it goes to $695 per adult and $347.50 per child from $325 this year. The year after that gets even worse.

    Third – what would you do with these folks – sick or not – if they do not get insurance? What’s the plan? Just let them go to the ERs like before?

    Fourth – Ocare is not in a “death spiral” unless your news comes from the right-wing echo chamber – because those costs are covered from the funding already in place for ObamaCare which the Brietbart and company folks seem clueless about.

    But the real question here is what would you do instead?

    The latest GOP plan is to do away with employer-provided health insurance subsidies, i.e. the Fed and State tax free policy- that would go away and each worker would get a $2500 credit with which to go out and shop around for insurance. Every worker would get it – no matter whether their employer would no longer offer non-tax free insurance or not.

    They don’t really explain what happens to folks the insurance companies don’t want – which would be not only the current Obamacare “sick” but all those folks currently forced to be covered by employer-provided because the Feds require employer-provided insurance to cover all employees no matter how sick or old – AND to not charge them any more than the young and healthy- a clear subsidy – not recognized by most folks; So the GOP have not said how they would deal with that under their $2500 credit plan… would they just extend the govt edict that everyone has to be accepted by insurance companies AND the sick and old not charged any more either – the way it currently is with employer-provided or would they really open up the free market so that any insurance company could refuse to cover anyone they did not want to and/or charge them twice, 3 times, 5 times as much as the younger and healthier?

    Why does this matter?

    It matters because the current clueless condition of most folks who believe that somehow Obamacare is different – has a subsidy unlike Employer-provided – will be exposed for all to know… and at that point – no longer will folks be able to ignorantly claim that only Obamacare has gotten the sick and old to cover. They’ll realize that employer-provided works that way also.

    I wonder what all the 40-60 yr old folks are going to say when they find out the reality -that’s it’s the US govt that requires their employer-provided health insurance to offer them coverage rather than deny it like they have done for market-insurance before Obamacare came along.

    the biggest problem we have is – ignorance – of the facts – the reality of how employer-provided health insurance really works – that it too subsidizes the sick and older and that it too is force to offer insurance to the sick and older – just like Obamacare does.

  2. V N Avatar
    V N

    Put laws on how much suits/management can make in health care corporations and insurance. Put a 90%/10% cap instead of the 80/20 currently in use for claims/admin.

  3. LarrytheG Avatar
    LarrytheG

    re: ” But it turns out that the incentives were not harsh enough. (It would be interesting to know how aggressively the Obama administration is enforcing the provision — strict enforcement could create a political backlash.)”

    Obviously – Jim Bacon does not do the taxes for his family!

    else he’d KNOW that on Page 2 of the 1040 – line 61 – that’s where the penalty is assessed – and if the IRS does not receive a 1095 form from your insurer – then you hear from the IRS about the money you owe.

    http://www.tylerlynchpc.com/blog/wp-content/uploads/2015/02/form1040_page2.jpg

    http://www.ts1099.com/wp-content/uploads/2015/06/1095-C-FORM.jpg

  4. Peter Galuszka Avatar
    Peter Galuszka

    I doubt jim bacon does health care for his family either. Accounts for his lack of reality

  5. JOHN BR Avatar
    JOHN BR

    The Affordable care Act was fraudulent right from the start. Obama’s consultant has admitted they lied to the public, the media and legislators to get this passed. “You can keep your doctor”. Sure.

    But Larry and others will defend Obama and friends no matter how bad it gets or how may people are hurt. It’s what they do.

  6. LarrytheG Avatar
    LarrytheG

    No I won’t defend Obama nor Obamacare other than to say that people do not understand their own health care insurance and are in no position to judge other insurance – either – they don’t even understand their own.

    Most are clueless that employer-provided is forced by law to cover all employees and to do so with the same premiums for self and family regardless of age or health – they enjoy that protection while saying that
    people with Obamacare are “subsidized”.

    Obamacare is subsidized – yes – but so is Employee-provided. Employer-provided gets de-facto credits automatically embedded as it is not taxed as income. It’s subsidized a second time because, in effect – because premiums are the same regardless of age or health – the young and healthy subsidized the older and sick – just as Obamacare does.

    but I am FINE with another approach including the GOP approach of doing away with taxfree health care and giving everyone no matter who they work for the same $2500 credit.

    They still need to admit that insurance companies will dump anyone who is old or sick unless the Govt requires them to cover them also…

    so no – I’m not at all loyal to Obamacare at all.. but I do think people do not understand their own health care…just as Gruber said.

  7. TooManyTaxes Avatar
    TooManyTaxes

    Here’s a quick summary of the tax issues related to the tax exempt status of employer-provided health insurance, as taken from a 1994 Congressional Budget Office Document.

    “Although a de facto tax exclusion has always prevailed, its treatment by the Internal Revenue Code has changed over time. Up until 1943, the IRS had
    made no explicit ruling on employers’ contributions, but it took the position that most fringe benefits that were not paid in cash should be excluded from
    taxation. In 1943, the IRS ruled that employers’ contributions to group health insurance policies were exempt from taxation. Yet in 1953, an IRS Revenue Ruling stipulated that employers’ contributions to individual health insurance policies were taxable. In response, the Congress enacted section 106 of the Internal Revenue Code of 1954, which reversed the
    1953 ruling. Employers’ contributions for health and accident insurance are also exempt from payroll taxes under section 3121 of the code. The federal government imposed some restrictions on employment based health insurance, however, through the Employee Retirement Income Security Act of 1974 (ERISA) and its amendments.” CBO, THE TAX TREATMENT OF
    EMPLOYMENT-BASED HEALTH INSURANCE, March 1994, at p. 5.

    https://www.cbo.gov/sites/default/files/103rd-congress-1993-1994/reports/1994_03_taxtreatmentofinsurance.pdf

  8. LarrytheG Avatar
    LarrytheG

    The point is that income earned and spent on health insurance offered by the employer – but not insurance purchased outside the employer – is not taxed – not only not Federal or State Tax but also FICA –

    people who work full time at employers who don’t offer health insurance do not get the same benefit. They have to pay – essentially twice as much for the same coverage – IF they could get it at all because private sector health insurance could deny you coverage all together or charge you far more than the same coverage under an employer.

    so we had this totally inequitable system where people who worked in industries that did not offer health insurance – including most small employers – just could not get insurance because they did not get the same entitlement those who worked for other employers got.

    and the worst of it is that most folks don’t know this.

    they just assume it’s the employer that is providing the lower cost insurance and guaranteed coverage when, in fact, it’s the Govt through a law called HIPPA:

    Limits the ability of a new employer plan to exclude coverage for preexisting conditions;

    Provides additional opportunities to enroll in a group health plan if you lose other coverage or experience certain life events;

    Prohibits discrimination against employees and their dependent family members based on any health factors they may have, including prior medical conditions, previous claims experience, and genetic information; and

    Guarantees that certain individuals will have access to, and can renew, individual health insurance policies.

    https://www.dol.gov/ebsa/publications/yhphipaa.html

    when similar benefits were given to people under ObamaCare – they’ve been accused of getting tax breaks and subsidies they did not deserve – as if the folks who got those same benefits with employer-provided DID deserve them.

    so again – I’m not a defender per se of ObamaCare.

    what I support is a fair and equitable system where everyone is treated the same under the law – for health insurance.

    If folks really want a free market where the insurance can refuse to cover you – that’s fine – just make it the same for everyone.

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