The Affordable Care Act (ACA), otherwise known as ObamaCare, began its third open enrollment season over the weekend.
As consumers began to shop for health care insurance coverage that will take effect in 2016, there did not appear to be too many technical glitches at HealthCare.gov. Despite that small success, this open enrollment season will present challenges to the Obama administration and insurers trying to entice people who have not previously signed up for ACA coverage.
The premiums for many plans appear to have risen dramatically. Premiums for a very popular plan in the law’s “silver” metal tier is set to increase by 7.5% on average across over 30 states that rely on the HealthCare.gov marketplace.
Under the ACA, insurers have seen a growth in new membership in both individual plans and Medicaid plans that they administer for the federal government. This has translated into an expansion of the industry’s total United States revenue from $641 billion in 2013 to $743 billion in 2014.
But that growth has not translated into profits. In 2014, health insurance companies lost a total of $2.5 billion ($163 per consumer enrolled) in 2014. Many companies are expecting to lose money for 2015 as well.
Determined not to take a hit three years in a row, a lot of insurers are now changing their approach for 2016. They are making sweeping changes - from product design to pricing.
The health law changed the landscape for individual health care coverage. The law forced insurance companies to sell plans to all customers and prohibited them from charging certain rates based on health conditions. It was very tough for insurers to predict their costs and many companies did not set their rates high enough to cover said costs.
As a result, many smaller insurance startup companies have shut down and are continuing to do so. Larger companies were able to survive the losses - but will pass those losses onto their customers in 2016.
In fact, some companies will seek a roughly 35% rate increase for 2016. The new rate increases create a risk that many consumers will get sticker shock.
Still, insurers believe the market will grow - eventually. Brad Wilson, chief executive of Blue Cross and Blue Shield of North Carolina opined that, “The ACA is an accelerant, or a catalyst” for changes. “The market is, and will continue to evolve to, a consumer-centric, retail type.”