Obamacare’s Premium Manipulations

Obamacare’s preliminary premium rates are gradually being released across the country for next year’s plans. Democrats promised insurance premiums for families would decrease by $2,500 a year. This is just one of the many broken promises of the president’s health care law.

Since the law’s passage, insurance premiums have skyrocketed in many parts of the country. Preliminary estimates for 2015 show the problem is getting worse. These rate increases are troubling for middle class families, so the Obama administration is trying to cover them up. It is doing everything it can to hide from the American people the rate shock that is a consequence of the president’s failed health care law. 

Source: University of Minnesota analysis

Long gone is their promise of lower premiums for the American people. The administration now is engaged in a series of regulatory rewrites and administrative maneuvers to hide temporarily the damage the health care law is doing to insurance premiums.

Risk Corridors

The health care law’s risk corridor program was designed to transfer funds from health plans that make higher-than-expected profits to those that lose money in the exchanges. While the administration has pledged to implement this program in a deficit neutral manner, there remain serious problems with this program. 

Senator Sessions has noted, and the non-partisan Congressional Research Service confirmed, that the health care law does not include an appropriation to fund the risk corridor program. It appears that HHS may still make payments to insurance companies under this program, even though that could violate the Antideficiency Act. Senator Sessions and House Energy and Commerce Committee Chairman Fred Upton recently sent a letter to HHS Secretary Sylvia Mathews Burwell asking her to comment on the CRS opinion and on what other sources of funding HHS might use to fund this program.

Secretary Burwell pledged to be transparent during her confirmation hearing. This is a prime opportunity for her to commit to following the law by not using the risk corridor program to improperly manipulate premiums.

Reinsurance

The law’s reinsurance program is funded by fees paid by health insurance plans, including self-insured plans. It is scheduled to collect $25 billion over three years. The funding is supposed to compensate insurers that incur higher claims from their enrollees. A Centers for Medicare and Medicaid Services analysis predicted that these payments would lower premiums in the individual market between 10 and 15 percent.

Many large employers and unions argued that the reinsurance fee was unfair and forced them to subsidize insurance that their employees will not use. The AFL-CIO adopted a resolution at their 2013 convention calling for the elimination of the reinsurance fee. The Washington Post reported on November 6, 2013, that the administration had snuck out a rule to exempt many union health plans from the reinsurance fee. The rule conceals the effect of the law on rates for a select group, while doing nothing to help most Americans.

Medical Loss Ratio

Included in the health care law was a “medical loss ratio” requirement that insurers in the individual and small group market must spend 80 percent of their premiums on medical benefits. Those in the large group market must spend 85 percent. The administration has repeatedly touted this provision as a way consumers save money under the health care law.

But the administration has issued waivers to some states so they do not have to meet the MLR requirements. In addition, the administration recently issued a rule that would modify the MLR so insurance companies could keep more profits. It is another instance of President Obama trying to use unilateral changes, delays, and modifications to mask parts of the health care law that drive up the cost of insurance.

With partial implementation of Obamacare in 2015, insurance premiums have had their first upward spike. Families can expect another jump in health care premiums in January 2017. That’s when the law’s essential benefits requirements must be fully implemented, the reinsurance and risk corridor programs expire, and subsidies may no longer keep pace with health care costs. Without real reform, Americans will be paying the high cost of the president’s health care law long after he leaves office.