Why Obamacare premiums are rising -- and what you can do

What happens if you build it, and they come -- but it’s not the crowd you expected? For the Affordable Care Act’s health insurance exchanges, the result is a tumultuous period of change, including higher prices and fewer choices.

Premiums for middle-of-the-pack plans will increase an average of 25 percent across the 39 states that use the ACA’s federal insurance marketplace for 2017, the Department of Health and Human Services said earlier this week. On top of that, consumers shopping on HealthCare.gov will have plans offered only by an average of 3.9 issuers, down from 5.4 issuers in the current year, a Kaiser Family Foundation survey found.

The premium hikes and withdrawals of big insurers such as UnitedHealth Group (UNH) have landed Obamacare back in the middle of the political debate, with Republican Donald Trump predicting the law “is just blowing up.” 

Aside from predictions of the ACA’s demise, however, thousands of Americans will need to sign up for health care on the exchanges during the current open-enrollment period, which runs from Nov. 1 to Jan. 31. How can those consumers prepare for what might be a rough process?

Be ready to switch plans, said Elizabeth Carpenter, a senior vice president at consulting firm Avalere Health.

“The reality is that most consumers enrolled through exchanges can protect themselves from large premium increases by switching plans,” Carpenter said. She noted that her firm estimates more than 1 million consumers who buy their insurance through an ACA exchange will need to switch plans this year.

About 85 percent of enrollees receive income-based tax credits that offset their cost of their premiums on the second-lowest silver plan within a consumer’s area, But the average premium for the second lowest-cost silver plans will increase an average of 22 percent next year, so Avalere recommends that consumers switch to a plan with a lower cost than the second-lowest silver plan.

“If you can switch plans, the percentage of what you pay will be held firm,” Carpenter said.

In many states, enrollees will also cope with fewer carriers to chose from, but even in the five states where only one insurer is left standing -- such as Alabama -- you should still find plan choices, Carpenter said. “The remaining insurance carriers might offer an HMO and a PPO in a certain level,” she said. “But be mindful of whether your drugs are covered and whether your providers are in-network.”

Even though many Americans will be able to protect themselves from premium increases by shopping around, a sizable group of consumers will bear the brunt of the price hikes: the upper middle-class and the wealthy. Subsidies are available only for individuals and families who make less than 400 percent of the federal poverty level. For a family of four, that threshold is $97,200, while for an individual the cutoff is $47,520.

To be sure, the bulk of Americans won’t be feel the ACA’s higher premiums, given that about half of the population is covered through employer-based insurance. Another 35 percent receive coverage through Medicaid and Medicare. However, a significant number of Americans are eligible for financial assistance through the ACA, but they aren’t enrolled. About 5.3 million Americans who qualify for tax credits through the ACA haven’t signed on.

That speaks to one of the reasons Obamacare premiums are rising sharply for 2017: The number enrollees stands at about 10.4 million individuals, or less than half of what the Congressional Budget Office projected in 2011. 

Second, the mix of consumers isn’t what the ACA’s architects had designed for. Enrollees are generally older and poorer than they expected. Avalere said 26 percent are older than 55, although that age group accounts for only 16 percent of the population.

Last, some programs that had stabilized the ACA’s market are ending, such as its reinsurance plan. That program paid insurers who took on high-cost patients and is thought to have reduced premiums by 10 percent. Since the reinsurance program expires this year, insurers are raising premiums to cover its absence.

Even though critics say the ACA’s exchanges aren’t working, Carpenter noted that it’s likely the marketplaces will evolve through regulatory changes that will help stabilize them. She added that the health care law is much broader than the exchanges alone, and the ACA’s reforms “have fundamentally changed the market.”

“You have millions of Americans who have gained coverage through Medicaid expansion, young adults who have stayed on their parents’ insurance,” she said. “People can’t be denied coverage because they’re sick. Those are pieces of the Affordable Care Act that are very much benefiting consumers.”