Opinion: Rising Premiums for Obamacare Plans, Some Hidden Good News

Joel C. Cantor | October 31, 2016 | Opinion
Open enrollment on healthcare.gov starts Tuesday, November 1st. A look at the cost of plans for 2017 offers insights into how well the marketplace is working in New Jersey.

Joel C. Cantor
Data showing that Obamacare marketplace plan premiums are rising isn’t good news, but it is not all bad either, particularly for New Jersey.

First, it is important to understand what these numbers represent. Last week, the costs for plans on the Affordable Care Act’s online marketplaces for 2017 coverage were posted. Those data showed that the average cost for a midrange silver plan across 28 states rose 24 percent since last year. In New Jersey, however, the increase of the benchmark silver plan rose by less than a third as much, by 7 percent.

Premiums were way too high to begin with, making coverage unaffordable for many, and any increase is bad news. But happily, the New Jersey increase was lower than all but 11 states (premiums actually fell in a few states). And we fared much better than our neighbors, with a 51 percent increase across the Delaware and 24 percent across the Hudson.

The pain will be even less for the eight-in-ten buyers on the marketplace who are eligible for federal subsidies. Subsidies are tied to the benchmark silver premium, so in New Jersey they are going up 7 percent as well. The government is picking up the entire price increase for many.

Those buying higher-end plans, even with subsidies, and anyone not eligible for a subsidy will have it tougher. For those purchasers, it will be important to shop among plans (including checking plans offered directly by insurers without subsidies outside the online marketplace), although changing plans may mean having to switch providers or paying higher deductibles or other cost sharing.

One factor could make future increases less than what we’re seeing this year. In writing the Affordable Care Act, Congress assumed that healthy people would be slow to enroll. They were right. To compensate for slower uptake by the healthy, the ACA, in effect, subsidized nongroup health plans for 2014 to 2016. This means that part of the 2017 premium hike reflects the one-time impact of this subsidy going away.

This year three of five insurers stopped selling marketplace plans, a troubling sign. But as Katherine Hempstead and I noted in an earlier column the carriers that left had small market shares and the remaining two, AmeriHealth and Horizon Blue Cross Blue Shield, appear to be competing in a fairly stable market. If market conditions remain stable, we may see more carriers return to the subsidized marketplace in 2018 (in fact, several still sell unsubsidized nongroup plans off the marketplace).

One indication that the New Jersey nongroup market has adequate competition and stability is that we see less premium variability for similar plans among carriers than we did in 2014 and 2015. Company actuaries have more experience on which to base rates, and New Jersey insurers seem to have done better in setting premiums, at least in 2016, compared with other states. This is a tribute both to New Jersey’s long-standing regulatory structure and to a job well done by the carriers.

A second important marker that augurs well for New Jersey is that our premiums are looking comparatively better than other states. As noted, our increase this year was lower than average. Of the 48 states with published premiums, New Jersey had the ninth highest in 2016. In 2017, we will drop close to the middle of the pack, with the 22nd highest benchmark premium.

We certainly cannot say that New Jersey has achieved affordable health insurance, but the trend in 2017 is in the right direction. Ultimately, achieving true affordability will require turning around longstanding trends in the cost of medical care (not just insurance) or increasing the level of subsidies in the marketplace, or both. Smaller steps, such as more robustly educating and enrolling the remaining uninsured who are disproportionately young and healthy can also help.

We cannot declare New Jersey health reform complete, but we have a strong platform to build on.