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Originally published Monday, May 26, 2014 at 6:51 PM

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2015 health-care rate hikes may not be as daunting

Some nonpartisan industry watchers say they expect the big increases to hit less frequently in the years to come, a benefit of competition and greater scrutiny fostered by the law.

The Associated Press

5 rate-hike variables

Here are five variables that could affect the prices of 2015 health-insurance coverage starting next fall.

Medical costs: A key reason behind premium changes, this reflects both the price of care and whether people are using more or less of it. This varies widely across the country.

Customer health: Insurers may have to raise rates if the number of customers with expensive medical conditions exceeds their projections. They also have to design their plans to make them attractive to healthy people, who will contribute more in premiums than medical claims.

Age: The overhaul limits how much more an insurer can charge older people, who typically use more health care. An insurer needs premiums from younger customers to make up for what they can’t charge older policyholders.

Competition: The cost of care can be higher in areas where one hospital or care provider dominates a market. Also, insurers don’t want to lose customers by raising rates too high, especially after the exchange made it easier for people to shop for coverage.

The overhaul: Technical problems with the website last year frustrated many trying to buy coverage on the exchanges and may have turned off some younger customers. President Obama’s decision late last year to allow some policyholders to keep individual coverage they had before 2014 may keep some healthy customers off the exchanges.

The Associated Press

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The wild hikes in health-insurance rates that blindsided many Americans in recent years may become less frequent because of the health-care overhaul.

Final rates for 2015 won’t be out for months, but early filings from insurers suggest price increases of 10 percent or more. That may sound like a lot, but rates have risen as much as 20 or 30 percent in recent years.

The rates that emerge over the next few months for 2015 will carry considerable political weight, because they will come out before Republicans and Democrats settle their fight for Congressional control in next fall’s midterm elections. Republicans are vowing to make failures of the law — and abnormally high premiums — a main theme of their election push.

In addition to insuring millions of uninsured people, the other great promise of the health-care overhaul was to tame the rate hikes that had become commonplace for individual insurance coverage.

No one expects price increases to go away, but some nonpartisan industry watchers say they do expect the big hikes to hit less frequently in the years to come, even though it’s still early in the law’s implementation. They point to competition and greater scrutiny fostered by the law as key factors.

Public insurance exchanges that debuted last fall and were created by the law make it easier for customers to compare prices. The overhaul also prevents insurers from rejecting customers because of their health.

That means someone who develops a health condition like high blood pressure isn’t stuck in the same plan. He or she can now shop around.

The Urban Institute, a nonpartisan policy research organization, said in a recent report that competition will help restrain individual insurance prices next year.

And it could have a lasting impact once the new markets for coverage stabilize in a few years, said Larry Levitt, an insurance expert with the Kaiser Family Foundation, which analyzes health-policy issues. “Now if a plan tries to raise premiums a lot, people can vote with their feet and move to another plan.”

Greater scrutiny by regulators could also keep rates from skyrocketing. The overhaul requires a mandatory review of rate increases larger than 10 percent, which can lead to public attention that insurers don’t want.

“Nobody’s going to get a rate increase unless they truly deserve it,” said Dave Axene, a fellow of the Society of Actuaries, who is working with insurers to figure out pricing. “The rigor that we had to go through to prove that the rates were reasonable, it’s worse than an IRS audit at times.”

To be sure, insurers and others in the field say it’s too early to fully understand what pricing trends will emerge for individual insurance plans, which make up a small slice of the insured population. And some experts aren’t convinced of any one outcome of the law.

Consultant Bob Laszewski called the idea that the exchanges will rein in prices by promoting competition an “unproven theory.”

“No one has any idea what this risk really looks like yet and probably won’t for two to three years,” he said.

Karen Ignagni agrees. The CEO of the trade association America’s Health Insurance Plans, which represents insurers, said competition among insurers will mean little if too many sick people sign up for coverage on the exchanges. Insurers need a balance between sick and healthy people to avoid future rate hikes.

Laszewski expects some plans to seek either big premium increases or decreases in 2015, but he says that says nothing about the long-term implications of the overhaul. He noted that insurers entered 2014 without a good feel for what their competitors would charge, so price swings are inevitable as companies adjust.

Charmaine Piquette, 60, said she’s “petrified” of a big increase for next year. “I finally feel like in my life I have a break and can afford to take care of myself even though I’m not living on very much a month,” said Piquette, who lives outside Milwaukee.

Piquette used Wisconsin’s public health-insurance exchange in March to get coverage from the nonprofit insurance cooperative Common Ground. The plan costs her only about $177 a month thanks to a $500 tax credit that’s part of the overhaul.

She lives mainly on about $1,200 a month in Social Security disability payments, but her health coverage helps her afford things like visits with a diabetes counselor to get her blood sugar back under control.

“I said, ‘Praise the Lord’ every single time I use this,” she said.

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