You may have heard stories about dramatic increases in private health insurance rates since the implementation of health reform. Although Illinois insurance carriers recently sent preliminary 2017 rates to regulatory authorities, we likely won’t know what the final prices and plans for next year look like until closer to the beginning of open enrollment. But we already know that misinformation about increased rates is being hyped by the media.
This is a lie about Obamacare plans that we’ve heard before. What stories about these proposed rate filings often miss is that, even if premiums go up, financial assistance (through tax credits) to help pay for those premium increases as well. Simply put, the majority of consumers in the Marketplace won’t feel the premium price increases that the media often focuses on.
A new report from the U.S. Department of Health and Human Services (HHS) proves the point. The report found that, last year, the average cost of Marketplace coverage for people getting tax credits went from $102 to $106 per month—a modest increase, especially when you think about how costs for everything tend to rise.
In Illinois, 75% of Marketplace consumers receive tax credits based on their income. By design, tax credits increase if the cost of the benchmark plan (the second lowest-cost silver plan) goes up. So if all premiums in a market go up by similar amounts, consumers who get tax credits will not necessarily pay more, because their tax credits will go up to compensate.
In addition, if a Marketplace consumer isn’t happy with his or her current plan—either because the premium went up or for another reason—the consumer has the ability to, and in fact is encouraged to, come back and shop around. According to HHS, nearly 50% of returning HealthCare.gov consumers selected a new plan for 2016. In Illinois, that number was greater than 50%, and those consumers saved an average of $636 annually.
The stories we keep seeing about big rate increases happen only in a world that doesn’t exist. As the HHS report notes, “the average premium changes reported in insurers’ rate announcements assume a scenario in which no consumer leaves the Marketplace, no new consumers enroll, nobody switches plans, no new plans are offered, and no one receives tax credits.” We know from the past three years of Marketplace experience, these assumptions do not reflect reality. Beyond the fact that the majority of Marketplace customers receive tax credits, we know that consumers whose income or job situation changes will move between the Marketplace and employer-subsidized plans or Medicaid. Moreover, for better or for worse, the Marketplace is robust with choices (the number of plans in Illinois increased from 410 choices in 2015 to 480 choices in 2016) so people will often “vote with their pocketbook” and switch plans.
Of course any increase in premium prices for Marketplace consumers will be a hardship to many. Moreover, out-of-pocket costs (like high deductibles) continue to concern Illinois consumers. However, it’s important to step back and remember that before the Affordable Care Act, affordable, quality health care was completely out of reach for many consumers—for example the millions of people with pre-existing conditions. And for many more, health care plans excluded important services like maternity care or mental health treatment.
Now, Illinois consumers have the option to purchase quality health plans and have the financial assistance to help pay for them. The media need to acknowledge the immense benefits of these tax credits, if they are going to responsibly report on premiums.