Health industry officials say ObamaCare-related premiums will double in some parts of the country, countering claims recently made by the administration.
The expected rate hikes will be announced in the coming months amid an intense election year, when control of the Senate is up for grabs. The sticker shock would likely bolster the GOP’s prospects in November and hamper ObamaCare insurance enrollment efforts in 2015.
“The increases are far less significant than what they were prior to the Affordable Care Act,” the secretary said in testimony before the House Ways and Means Committee.
Her comment baffled insurance officials, who said it runs counter to the industry’s consensus about next year.
“It’s pretty shortsighted because I think everybody knows that the way the exchange has rolled out … is going to lead to higher costs,” said one senior insurance executive who requested anonymity.
The insurance official, who hails from a populous swing state, said his company expects to triple its rates next year on the ObamaCare exchange.
The hikes are expected to vary substantially by region, state and carrier.
Areas of the country with older, sicker or smaller populations are likely to be hit hardest, while others might not see substantial increases at all.
Several major companies have been bullish on the healthcare law as a growth opportunity. With investors, especially, the firms downplay the consequences of more older, sicker enrollees in the risk pool.
Much will depend on how firms are coping with the healthcare law’s raft of new fees and regulatory restrictions, according to another industry official.
Some insurers initially underpriced their policies to begin with, expecting to raise rates in the second year.
Others, especially in larger states, will continue to hold rates low in order to remain competitive.
After this story was published, the administration pointed to some independent analyses that have cast doubt on whether the current mix of enrollees will lead to premium hikes.
ObamaCare also includes several programs designed to ease the transition and stave off premium increases. Reinsurance, for example, will send payments to insurers to help shoulder the cost of covering sick patients.
But insurance officials are quick to emphasize that any spikes would be a consequence of delays and changes in ObamaCare’s rollout.
They point out that the administration, after a massive public outcry, eased their policies to allow people to keep their old health plans. That kept some healthy people in place, instead of making them jump into the new exchanges.
Federal health officials have also limited the amount of money the government can spend to help insurers cover the cost of new, sick patients.
Perhaps most important, insurers have been disappointed that young people only make up about one-quarter of the enrollees in plans through the insurance exchanges, according to public figures that were released earlier this year. That ratio might change in the weeks ahead because the administration anticipates many more people in their 20s and 30s will sign up close to the March 31 enrollment deadline. Many insurers, however, don’t share that optimism.
These factors will have the unintended consequence of raising rates, sources said.
“We’re exasperated,” said the senior insurance official. “All of these major delays on very significant portions of the law are going to change what it’s going to cost.”
“My gut tells me that, for some people, these increases will be significant,” said Bill Hoagland, a former executive at Cigna and current senior vice president at the Bipartisan Policy Center.
Hoagland said Sebelius was seeking to “soften up the American public” to the likelihood that premiums will rise, despite promises to the contrary.
Republicans frequently highlight President Obama’s promise on the campaign trail to enact a healthcare law that would “cut the cost of a typical family’s premium by up to $2,500 a year.”
“They’re going to have to backpedal on that,” said Hoagland, who called Sebelius’s comment a “pre-emptive strike.”
“This was her way of getting out in front of it,” he added.
HHS didn’t comment for this article.
Insurers will begin the process this spring by filing their rate proposals with state officials.
Insurance commissioners will then release the rates sometime this summer, usually when they’re approved. Insurers could also leak their rates earlier as a political statement.
In some states, commissioners have the authority to deny certain rate increases, which could help prevent the most drastic hikes.
Either way, there will be a slew of bad headlines for the Obama administration just months before the election.
“It’s pretty bad timing,” said one insurance official.
Other health experts say predictions about premiums are premature.
David Cutler, who has been called an architect of Obama-Care, said, “Health premiums increase every year, so the odds are very good that they will increase next year as well. None of that is news. The question is whether it will be a lot or a little. That depends in part on how big the insurers think the exchanges will be.”
Jon Gruber, who also helped design the Affordable Care Act, said, “The bottom line is that we just don’t know. Premiums were rising 7 to 10 percent a year before the law. So the question is whether we will see a continuation of that sort of single digit increase, as Sebelius said, or whether it will be larger.”
The White House and its allies have launched a full-court press to encourage healthy millennials to purchase coverage on the marketplaces.
HHS announced this week that sign-ups have exceeded 5 million, a marked increase since March 1.
White House press secretary Jay Carney on Tuesday claimed the administration has picked up the pace considerably, saying months ago reporters would have laughed if he “had said there would be 5 million enrollees by March 18.”
It remains unclear how many of those enrollees lost their insurance last year because of the law’s mandates. Critics have also raised questions about how the administration is counting people who signed up for insurance plans.
Political operatives will be watching premium increases this summer, most notably in states where there are contested Senate races.
In Iowa, which hosts the first presidential caucus in the nation and has a competitive Senate race this year, rates were expected to rise 100 percent on the exchange and by double digits on the larger, employer-based market, according to a February 2013 article in the Business Record.
Sheila Timmons contributed.
This story has been updated to note that the Business Record article was published in 2013, not 2014.