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 The Obama administration declared victory on Tuesday
over signing up more than 7 million people for this year, overcoming
technology failures that stymied enrollment in the program's early
weeks and Republican efforts to discredit it in the eyes of
consumers.
But insurers have already said that the first group of new enrollees
under Obamacare, as the law is widely known, represent a higher rate
of older and costlier members than hoped. To keep their health plans
from losing money in the coming years, many expect monthly premium
rates to rise by double-digit percentages in some parts of the
country.
That could set the stage for a public outcry ahead of congressional
elections this year, giving ammunition to Republicans and creating
new friction with the White House that could endure into the 2016
presidential election.
"I do think that it's likely premium rate shocks are coming. I think
they begin to make themselves at least partially known in 2015 and
fully known in 2016," said Chet Burrell, chief executive officer of
CareFirst BlueCross BlueShield. "That will be different in different
parts of the country. I don't think it will be uniformly the same."
"Do the premiums need to rise, just to cover the cost, to such a
level that it creates both political heat, regulatory heat,
finger-pointing, accusation?" Burrell said at the Reuters Health
Summit in Washington on Tuesday. "If that happened, then the
environment becomes very difficult and it doesn't in a sense matter
that you worked out all the details. You're at each others' throats
because it just costs so much."
CareFirst, which sells Obamacare plans in Maryland, Virginia and the
District of Columbia, expects to have signed up 140,000 people for
this year. Burrell said about half of the sign-ups were people over
the age of 45.
David Cordani, CEO of insurer Cigna, said his company has raised the
issue of potential rate increases with the Obama administration and
has suggestions for changes to the program that could help mitigate
sharp spikes, including providing new lower-cost options to
consumers and giving them a greater choice over which health
benefits are covered.
He described the discussion as part of an ongoing, carefully crafted
dialogue with the White House that has been built in recent years.
"There's a risk of finger pointing," Cordani said. "If rock-throwing
transpires, the party that will probably lose in the equation is the
individual. That will be a failure. To me, that's a failure of
leadership of all the parties involved: states, insurers, the
administration. And we're trying to proactively engage in that
conversation now."
Cigna, which is selling Obamacare plans in five states and is
considering whether to expand that further in 2015, has said it
won't make money on the business this year. It expects to have
signed up as many as 100,000 new members under the program for this
year.
Cordani said on Tuesday he didn't expect "a big positive return"
financially in 2015.
White House spokesman Jay Carney said that the proportion of old and
young customers in the exchanges will not keep the exchanges from
working well or trouble insurers.
"We already know that breakdown is sufficient to ensure that the
marketplaces will effectively function, that issuers will feel
comfortable with the demographics," he said.
BALANCING THE BUSINESS
Some policy experts question whether insurers would really be wise
to raise prices dramatically next year as they try to build a new
market and gain share.
"You want to establish a client base. You want to attract good
risks," said Henry Aaron, an economist at the left-leaning Brookings
Institution, referring to healthier consumers. "You don't do that by
charging very high premiums. If I were in the insurance business,
and I got a little bit of deterioration in my pool, I'm not sure I
would respond to it next year."
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Some states are confident that their Obamacare markets will be
robust enough to prevent sharp rate rises. In California, which
embraced the law early on and has the single largest insurance
exchange in the country, more than 1.2 million people signed up for
coverage this year.
The head of the state's insurance exchange said he expects insurers
to factor in that strong enrollment as they calculate rates for
2015.
"They are going to look at enrollment and I think that bodes well
for having certainly single-digit (rate increases) and, I hope, as
low rates as possible," Covered California Director Peter Lee said.
But U.S. Senator Marco Rubio, a prominent Republican critic of
Obamacare, said the skew of enrollment towards older consumers who
are more likely to be sick is one of the program's fundamental flaws
and proof it should be changed or even repealed.
While he said insurers may have no choice but to raise prices to
prevent major losses, he opposes provisions in the law that provides
funding to the industry in the next few years to offset such risks.
"I think what they should be more concerned about is that once
the exchanges fail and once this happens, that the argument that
might come from the administration would be 'well, the reason this
is happening is the greedy insurance companies want to make more
money' as opposed to these companies are simply pricing out what it
is they are getting," Rubio told the Reuters Health Summit.
"I would say to you that many of these companies were willing
participants in all of this. Many of them supported the law,
thinking it was going to force more customers in their direction.
It's not turning out the way they planned," he added. "I'm not sure
that taxpayers should be involved in paying for it."
The average monthly insurance premium in 2014 for an individual
is $328 nationwide, according to government data. But the figures
varied widely by state, and within states. More than 80 percent of
people signing up for Obamacare this year were also eligible for
government subsidies, in the form of tax credits and cost-sharing
assistance, to offset their monthly costs.
At the same time, several million Americans who were already insured
under the individual market faced the cancellation of their policies
this year, creating a political firestorm for Obama, who had
promised that consumers who liked their existing plans could keep
them.
Many of them found the new Obamacare health plans, which require
insurers to cover more benefits, were more expensive than their old
policies. The administration has allowed insurers to extend those
policies for up to three years.
(Reporting by Caroline Humer and David Morgan;
editing by Michele Gershberg and Jim Loney)
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