Insurers operating on Obamacare exchanges have requested an average premium hike of 24 percent across the country, according to independent analyst Charles Gaba. Even as they request higher premiums, many insurers have announced plans to flee exchanges or reduce their involvement, leaving enrollees with fewer options and more expensive insurance.
Insurers’ requests for larger increases should not be surprising. Even with billions in subsidies, Obamacare’s failure to attract enough enrollees has caused an insurer exodus. In a 2016 fact sheet, the Centers for Medicare and Medicaid Services (CMS) reported that as of March 31, only 11.1 million consumers had planned on staying in Obamacare marketplaces. HHS on the other hand projected that the marketplace would have a lower enrollment at the end of the year—only 10 million. Yet, these numbers are only half of what the CBO had originally projected, which was 24 million.
As enrollment numbers have failed to materialize, Obamacare insurers have not received the revenue that they had expected. This has led to two outcomes – higher premiums and fewer insurers operating on exchanges.
Large insurers have recently been revising their initial rate requests. In Tennessee, Cigna and Humana revised their rates up more than 20 percent. Cigna requested a 46 percent average increase, up from 23 percent, and Humana asked for a 44 percent increase, up from 29 percent.
So far, only 5 states have approved rate increases—Mississippi, New York, Oregon, Rhode Island, and Vermont. These 5 states have an average approved rate increase of 17 percent. While they only make up about 6.1% of the population, Gaba notes that the rate will undoubtedly fluctuate as larger states’ rates are accounted for.
One reason insurers are struggling to operate on exchanges is that they are failing to enroll enough young enrollees. Insurers need 40% of enrollees to be in the 18-34 age range in order to offset the costs of those who are older and typically rack up the insurance bill. However only 28% of exchange participants are in the golden 18-34 range, leaving insurers with a risk pool that is unsustainable.
Due to insurmountable losses, the nation’s largest insurer, UnitedHealth, will be pulling out of 26 of the 34 exchanges it participated in last year. Following United’s footsteps, Aetna announced yesterday that it would pull out of all but 4 states and remain in only 242 counties.
The exodus of insurers from Obamacare exchanges is not self-contained – it is leading to higher costs and more unaffordable insurance. The significant increases in rate requests is just another indicator that Obamacare is failing, but the larger than expected requests are showing that it is failing faster than expected.