White House Asking States to Cut Big Obamacare Rate Increases for 2016

The Obama administration is worried that proposed Obamacare rate increases for 2016 could further damage public’s perception of the Affordable Care Act. To combat this the administration is urging states to review rate increases requested by insurers with an eye toward keeping them down.

The New York Times reported last month that market-leading insurers around the country, like Blue Cross and Blue Shield, were seeking rate increases of 20 to 40 percent for 2016. Insurers say these rate increases are necessary because those enrolling in the Obamacare marketplace continue to be less healthy than anticipated.

But the Obama administration is urging state regulators, who have the power to review rate requests, to keep the rates down. In a letter to state commissioners, the chief executive of the federal insurance marketplace wrote that the increasing tax penalty for failing to purchase insurance “should motivate a new segment of uninsured who may not have a high need for health care to enroll for coverage.”

However, in states where proposed increases were cut by regulators, some industry groups have complained. In New York, average rate increases of 10% were cut to 7 percent. A spokesman for the New York Health Plan Association tells the Times, “Health plans have suffered financial losses the last two years when the state significantly reduced premium requests. Plans cannot be expected to continue losing money year after year and remain viable.”

That complaint echoes statements from other insurers around the country. A spokesman for Blue Cross and Blue Shield of Minnesota told the Times last month, “Our claims experience has not slowed at all.” BC/BS of Minnesota requested a 50% rate increase for next year. Similarly, Arches Health Plan CFO Nathan T. Johns told the Times, “Our enrollees generated 24 percent more claims than we thought they would when we set our 2014 rates.” His company, which has a quarter of the Utah market, is requesting a 45% increase for next year.

The Obama administration is emphasizing that 85% of all those who have purchased insurance thus far are receiving subsidies. That means that a substantial portion of the rate increases will be absorbed by taxpayers, not the individuals paying the premiums.

In addition, it has been pointed out by Kaiser that those willing to shop for a new plan can avoid the worst of the rate increases. However, changing plans every few years is a headache for consumers administratively and also means that, in some cases, they will lose the doctors they had under a previous plan.

Keeping the same plan and doctor were two of the most frequent promises President Obama made about the ACA when he was trying to sell it to the American people.