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Apr 2016

ACA Forecast: More Storms with Rising Costs

Obamacare critics predicted that the Affordable Care Act (ACA) would ultimately prove to be an oxymoron. Now, those critics are watching the first major domino fall as United Healthcare, the biggest health insurer in the U.S., recently announced that it plans to exit most of the Affordable Care Act state exchanges where the plan operates by 2017.

All eyes, especially those of other health plans, have been on United since the company indicated back in 2015 that it would be dropping coverage of the plans in Arkansas, Georgia and Michigan. However, United CEO Stephen Hemsley noted in a press conference this month that “next year, we will remain in only a handful of states.”

It shouldn’t come as a huge surprise. United Health has already said that it lost $475 million on the ACA exchanges last year, and could lose another $500 million this year. Those numbers could rise in the coming years if the exchanges have too high of a percentage of unhealthy enrollees and if the predictions of higher premiums come true.

Marilyn Tavenner, who ran Obamacare during her tenure as the administrator of the Centers for Medicare and Medicaid Services, predicted this month that healthcare customers could be in for a major sticker shock in 2017.

“I’ve been asked, what are the premiums going to look like?” said Tavenner to Morning Consult. “I don’t know, because it also varies by state, market, even within markets … But I think the overall trend is going to be higher than we saw previous years … that’s my big prediction.”

Since its launch in 2013, the ACA has seen premiums, co-payments and deductibles, for the most part, skyrocket. The visual of actor Kevin Bacon’s Animal House character pleading with a stampeding crowd to remain calm as “All is well” closely resembles President Barack Obama’s administration continuing to spin how the federal law would reduce healthcare costs for Americans.

Statistics are starting to show how the ACA has caused many Americans to drop out of the program altogether, opting for much more affordable, but less comprehensive, non-Obamacare alternatives.

“The industry is clearly setting the stage for bigger premium increases in 2017,” Larry Levitt, an expert on the health law at the Kaiser Family Foundation, told The Hill.

So why are the rates rising faster than a river after 72 hours of rain? Tavenner pointed to a number of key factors, including the ACA rules preventing health plans from denying coverage to anyone suffering from a pre-existing condition.

“The problem with the exchanges … is people are still kind of seeing this as, ‘I use insurance when I’m sick, but I may not need it when I’m no longer sick,’” explained Tavenner. “So they tend to churn. And that churn increases premiums. So you have to kind of price over that.”

Tavenner also highlighted the upcoming end of certain rules that protected insurers from experiencing financial losses. Without these rules in place, many insurers will need to dramatically raise their premiums just to break even, let alone earn a profit. A health plan’s only other option is to drop out of the exchanges. This action would only accelerate the plans fiscally failing as the pool of unhealthy uninsured is no longer dispersed over many plans.

That promise that healthcare costs would go down by $2,500 for an average U.S. family proved to be a failed promise as a Wall Street Journal analysis of 2016 rates showed that premiums for individual health plans are going up, with double-digit increases more typical than not.

It is true  that more Americans are now covered than in 2008. However, what good does health insurance do the consumer if the consumer is scared of using their plan because of large deductibles and co-payments they cannot afford? The analysis that the health insurance premiums will continue to climb may be the final straw. Many consumers may consider paying the ACA penalty for not having coverage as a better financial option.

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