May 21, 2015

Obamacare Plan Premiums Increasing Again – Maybe a Lot


  1. The largest insurers in Maryland, Oregon, South Dakota, and Tennessee are seeking average premium increases of between 25 and 43 percent.

  2. Insurers have enrolled a relatively older and sicker population than they anticipated.

  3. Young, healthy, and middle class people appear to be shunning Obamacare plans and the law’s reinsurance and risk corridor program subsidies for insurers are disappearing.


One of Obamacare’s central effects on health care was creating new mandates and regulations on insurance offered through the individual market. These mandates caused premiums to skyrocket, increasing individual market premiums by nearly 50 percent between 2013 and 2014.

Premiums would have increased even more if not for Obamacare’s $10 billion subsidy of insurers through its reinsurance program. Through the reinsurance program, insurers get payments from Washington to cover most of the cost of their enrollees who have high annual claims. By offsetting the cost incurred by expensive enrollees, the program allowed insurers to charge lower rates for Obamacare plans. One insurance law expert estimated that the reinsurance program reduced Obamacare plan premiums by about 11 percent on average last year. Moreover, several insurers priced their plans expecting that the administration would allow for a large taxpayer bailout if insurance companies generally underpriced plan premiums.

As insurers begin to submit premium changes for 2016, several factors appear to be pushing premiums higher. The first is that insurers overall have enrolled a relatively older and sicker population than they anticipated. The second is that Obamacare’s reinsurance program backstop declines to $4 billion in 2016. The third is that Congress has signaled that it will prohibit the administration from forcing taxpayers to bail out insurers who lose money on Obamacare plans.

As relatively young, healthy, and middle class people shun Obamacare plans and the reinsurance and risk corridor subsidies disappear, premiums will undoubtedly rise. This paper summarizes early rate filings in states where insurers have already submitted them.

Connecticut

ConnectiCare, the largest insurer in the state with a 45 percent market share, has proposed a six percent average premium increase for next year. Anthem, the second largest insurer with a 33 percent market share, has proposed a seven percent hike on Obamacare plans for next year. Healthy Connecticut, Connecticut’s co-op, with a 14 percent market share, proposed a 14 percent premium increase for next year. Overall, the weighted average of the proposed premium increases for Obamacare plans is about eight percent in Connecticut.

Iowa

Earlier this year, the state’s co-op, CoOportunity Health, was liquidated despite receiving government loans totaling more than $145 million. Taxpayers will likely lose most, if not all, of that money. According to a January 23 article in the Wall Street Journal, “the amount owed on medical claims exceed[ed] CoOportunity’s cash on hand.”

Coventry Health Care was the only other insurer offering plans on the state’s exchange last year. Wellmark, the largest insurer in the state, refused to offer coverage through the exchange in 2014 and 2015; and it recently announced that it would not offer exchange plans next year either. However, Wellmark still has about 30,000 customers who purchase Obamacare plans off the exchange and it is seeking to raise premiums by an average of 28 percent for these plans. According to Wellmark, the company lost money on that group, mainly because they used more services than expected.

Maryland

CareFirst, the largest insurer in Maryland’s individual market with a 79 percent market share of exchange-based enrollments, has filed an average premium increase of 30 percent for next year. Last year, CareFirst CEO Chet Burrell pleaded with Valerie Jarrett for the administration to use taxpayer dollars to aid insurers who underpriced exchange plans in 2014. He threatened that insurers would have to increase premiums by 20 percent or more if the administration did not allow taxpayer money to flow through Obamacare’s risk corridors. Although Valerie Jarrett told him that the administration delivered insurers 80 percent of what they wanted on risk corridors, Burrell indicated it was not good enough. Without the bailout, CareFirst has made good on its promise to substantially raise rates.

Michigan

The two largest insurers in Michigan’s individual market have proposed significant rate hikes for their Obamacare plans next year. Blue Care Network, which sells 36 percent of products on the individual market, has proposed a 10 percent increase for 2016. Blue Cross Blue Shield of Michigan, with a 29 percent market share, has proposed an 11 percent increase for 2016. Overall, the weighted average of the proposed premium increases for Obamacare plans is about 10 percent in Michigan.

Oregon

Moda Health Plan, which enrolls about half of all individual market enrollees in Oregon, is seeking a premium increase of 25.6 percent for next year. According to regulatory filings, Moda expected its 2014 claims on Obamacare plans in 2014 would be about 76 percent of premiums and it would earn a one percent profit. It turns out that those assumptions were wildly optimistic, as Moda’s actual claims were 140 percent of premiums and it had a 62 percent loss on those plans.  Some of this loss is offset by Obamacare’s reinsurance subsidy program, which Moda estimates will amount to an average of $1,100 per enrollee in 2014. 

LifeWise Health Plan, with about 17 percent of the individual market, wants to raise premiums by 38.5 percent. PacificSource Health Plans, with about four percent of the individual market, wants to raise premiums by nearly 43 percent. One consumer advocate said that the proposed rate hikes in Oregon are the highest he has seen since 2010.

South Dakota

Wellmark announced late last week that it is proposing a 43 percent premium increase for Obamacare plans in South Dakota for next year. In 2014, Wellmark enrolled 67 percent of people covered in South Dakota’s individual insurance market.

According to the company, this rate hike is necessary because of: an “increase in the number of large claims”; a “substantial increase in the volume and cost of prescriptions”; and a “number of members who cancelled their coverage after receiving costly health services.” Utilization was more than three times what the company expected. 

Tennessee

Blue Cross Blue Shield of Tennessee, the state’s largest insurer, which currently sells about 70 percent of exchange plans in the state, has filed for an average premium increase of 36.3 percent for 2016. This request is on top of last year’s 19 percent increase. Humana has requested a 15.8 percent increase on its exchange plans in the state.

Vermont

Citing increasing costs from federal and state government requirements, Blue Cross Blue Shield of Vermont requested an average rate increase of eight percent and MVP Health Care requested an average rate increase of three percent for 2016 individual plans. Blue Cross Blue Shield of Vermont has about eight times more exchange enrollees than MVP Health Care. Overall, the weighted average of the proposed premium increases for Obamacare plans is about eight percent in Vermont.

Issue Tag: Health Care