Reports Indicate Predictions Of Massive Premium Increases Under Obamacare Are Unlikely Due to Greater Competition In 2015

There is further evidence that another Republican prediction regarding the Affordable Care Act is not likely to take place. A study by the Robert Wood Foundation predicts that premiums will not increase greatly next year due to an increase in the number of insurance companies entering the market, with greater competition acting to lower prices. The Hill reports:

Fears that insurance premiums will spike next year are premature, according to a new report that argues market competition will likely keep costs from rising.

Critics of the Affordable Care Act have long warned that premiums for the ObamaCare plans would skyrocket in 2015 as insurers scrambled to make up for setting artificially low prices this year. Researchers at the Robert Wood Johnson Foundation argue those fears are misplaced.

“In competitive markets, unless all insurers behave similarly, those that increase premiums will suffer the loss of a market share to those that continue to price more aggressively,” said the authors of the report released Monday. The competitive pressures mean insurers are unlikely to risk raising their premiums too high for fear of losing customers, the report says.

Researchers compared data on premium costs in eight states around the country and found competition in the insurance markets was typically high, especially in the cities. They say the same competitive factor that led to low premium rates this year is likely to keep prices in check next year.

However, the report says some rural states may see higher premium prices because there are fewer insurers and therefore less competition.

The report also said the number of enrollees in ObamaCare will grow as the years go on, spreading the amount of risk insurers have to bear and relieving the need for price hikes.

Besides adding more of the uninsured, there are an estimated 3.2 million people who continued on health plans this year which were not compliant with the Affordable Care Act. These people were either grandfathered into their old plan under rules in the Affordable Care Act or were allowed to keep non-compliant plans after the rules changes in response to the publicity regarding cancellation letters last fall.

A study by The National Bureau of Economic Research found that prices in 2014 where higher than they might otherwise have been as many insurance companies only offered limited plans, or stayed entirely out of the market for the first year. Kaiser Health News reports that in increase in the number of insurance companies planning to offer coverage in 2015 should help keep premiums lower:

What if every insurer selling individual plans in at least some portion of a state had decided to offer 2014 exchange policies throughout that state? Average premiums on healthcare.gov for the second lowest-cost silver plan would have been 11.1 percent lower, the researchers found.

That level of competition would have saved federal taxpayers $1.7 billion in subsidies, they reported — not to mention substantial amounts for consumers.

Competition varied sharply according to state and locality. Consumers in many markets saw only one company offering coverage while others saw eight or more. In general, the more competitors, the lower the premiums.

Carriers that stood aside or tread lightly in 2014 have said they may expand next year. That could increase competition and dampen premium increases.

UnitedHealthcare has “a bias to increase that participation in 2015,” Gail Boudreaux, the insurer’s chief executive, said recently.

More on this topic at Think Progress

 

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