Aetna CEO explains why Obamacare is causing insurance premiums to skyrocket

Many Americans who have been pushing into Obamacare’s health insurance exchanges have experienced sticker shock at the cost of health insurance plans available to them. Some are wondering why this has happened after President Obama promised Americans “affordable” health insurance.

During an interview last week, Maria Bartiromo, host of CNBC’s Closing Bell, asked Aetna CEO Mark Bertolini about some of the insurance premium horror stories that she and others in the media are hearing and asked what exactly is causing the cost of plans to necessarily skyrocket.

“[W]e spoke with two people yesterday who so upset. Intitially, her plan cost her, I think it was $250 a month. It’s gone up to $600 a month, the new plan. And then the other, it was costing her $500, it went up to $2,000,” noted Bartiromo. “I mean, the numbers are skyrocketing in terms of what these new plans are costing. Is it just because there’s just a lot more things in there, and many of these things, they don’t even want?”

“I mean, they said, ‘I don’t need this, I don’t need that. I don’t need child care, that’s not what I’m looking for.’ How come it’s so much more expensive, the new plans?” she asked.

Bertolini explained that there are three factors that are behind the skyrocketing premiums, taxes and fees, Obamacare’s “minimum essential benefits.”

“The largest factor is that the essential benefits requires a minimum of a 60% actuarial benefit,” noted Bertolini. “For most Americans and more than half of Americans who buy individual coverage, there current benefit plan is below 50%. So if you just move up to 60%, that’s a 20% increase out of the box.”

For those who don’t know, the actuarial benefit is the share of medical expenses for which the insurance company is responsible. The insured pays the remainder through copayments, deductibles, and coinsurance. The higher the actuarial benefit, the lower the out-of-pocket cost to the insured.

Part of Bertolini’s comment on this particular point can also be read as a dig at President Obama, who had promised Americans could keep their health insurance plan if they liked it. He subtly pointed out that “most Americans and more than half of Americans who buy individual coverage” don’t have a health plan that meets the actuarial benefit requirements mandated by Obamacare.

“Secondly, there’s anywhere from 4% to 5% in taxes and fees associated with the new Affordable Care Act,” Bertolini continued, adding later that Aetna will pass $1 billion in taxes and fees in Obamacare to consumers. “And there are changes, the third thing is there are changes in rating. There are more benefits required. There are changes, you know, in preexisting conditions.”

“So all those things add up to an average increase we’ve seen across the United States, depending on the market, of anywhere from 30% to 40%, ranging anywhere from low single digits, all the way over 100% increases,” he added.

There were some other good parts of this interview. Bertolini would later dive into the impact that Obamacare is having on the job market based on what Aetna is seeing in its large group accounts. He does note that they are seeing decreases in overall employment and more part-time employment.

President Obama has insisted that the cost of coverage is cheaper and that the benefits are better than plans that many people have had in the past. The problem with that statement is that a health insurance plan is only substantially cheaper if you qualify for subsidies (people with incomes of up to 400% of the poverty level, or up to $94,000 of income for a family of four in 2014).

The Kaiser Family Foundation estimates that 48% of Americans who purchase coverage on the exchange will have access to the subsidies. Those who don’t qualify, because they make to much money, will have to pay the full cost of health insurance coverage on the exchanges.

Even with the subsidies, the costs for health insurance coverage are still extraordinarily high for young people, a segment of the population desperately needed to make the math behind Obamacare work. Some may even choose to go uninsured, rather than have to pay substantially more for coverage than they did in the past.

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