During testimony last week before the House Ways and Means Committee, Health and Human Services Secretary Kathleen Sebelius conceded that health insurance premiums would go up for plans in 2015, though she downplayed the increase by claiming that they would “go up at a smaller pace than what we’ve seen since 2010.”
There are varying estimates about how much premiums have gone up over the last several years, but everyone tends to agree that the increased costs are a concern. In fact, President Barack Obama has cited premium increases as part of the larger case for healthcare reform, promising that Obamacare would reduce premiums by $2,500 per year.
But, to Sebelius’ point, let’s take a look a premium increases, not just since 2010, but going back to 2005 through data provided by eHealthInsurance.com. As you can see in the chart below, the average individual health insurance premium rose by 37% from 2005 to 2013 and by 31% for the average family premium. Keep in mind that these are pre-Obamacare premiums.
Here’s the kicker, folks. eHealth, the nation’s first and largest private exchange, has also released data comparing average February 2013 premiums to unsubsidized plans that were being purchased in February 2014.
According to data released last month, the average increase for an individual health plan purchased through the eHealth was 39% compared to 2013, pre-Obamacare coverage and 56% for a family plan.
The average increase for health plans between 2013 and 2014 surpassed the average increase of the previous eight years combined.
Why did premiums rise so much? Mark Bertolini, CEO of Aetna, explained the reasons in an October appearance on CNBC, pointing to actuarial benefit requirements in the law, taxes and fees that have been passed on to consumers, and the mandated benefits.
“[A]ll those things add up to an average increase we’ve seen across the United States,” noted Berotlini, “depending on the market, of anywhere from 30% to 40%, ranging anywhere from low single digits, all the way over 100% increases.”
Sebelius can’t really predict that the premiums will “go up at a smaller pace than what we’ve seen since 2010.” Why? Well, the Department of Health and Human Services can’t tell Congress how many of the 4.2 million people who’ve “selected plans” on the exchanges have actually made a premium payment. Insurers, however, have reported that roughly 20% haven’t made a payment.
Additionally, it remains to be seen how many young people the administration will sign up for health coverage. Through February, just 25% of those who’d selected plans were between the ages of 18 and 34, far below the 38% to 40% the administration said it needed for the risk pools to be sustainable.
Now, it may be that the bailout provisions, which the administration expects to cost $5.5 billion in the next fiscal year, limit the impact of the increases. But if the administration didn’t expect that premiums would rise by a significant amount, it wouldn’t have delayed the 2015 open enrollment period until after this year’s mid-term election. After all, sticker shock could be electoral poison for Democrats.