Average Premiums for ACA Plans Will Rise

Average Premiums for ACA Plans Will Rise 2480 2480 Balance Point Team

ACA premiums risingHere’s Why and What You Need to Know

Premiums for mid-level Obamacare health plans sold on the federal exchanges will see their biggest jump yet next year. Monthly premiums for benchmark silver-level plans are going up by an average of 25 percent in the 38 states using the federal HealthCare.gov website, according to the U.S. Department of Health and Human Services. Last year, premiums for the second-lowest-cost silver plans went up by 7.5 percent on average across 37 states.

According to a recent article from The Motley Fool (and republished by Newsweek), the following four reasons are cited as possible reasons for the increase.

Not enough young adult enrollment

Obamacare hasn’t attracted the most sought after customers: healthier young adults. Since young adults are less likely to go to the doctor, or to need expensive medical care, their premiums are used – and needed – to offset the costs to treat older and often sicker individuals.

Obamacare enrollees are sicker and costlier

Insurers have discovered that Obamacare enrollees tend to be both sicker and costlier than most other types of enrollees. According to a study conducted by the Blue Cross Blue Shield Association, Obamacare enrollees produced a monthly cost of $559 – that’s 22% more than employer-based membership.

The risk corridor was a failure

The risk corridor represented a type of risk-pooling fund among insurance companies operating on the Obamacare marketplace exchanges.  Designed to promote competition, it required insurers who were excessively profitable to put some of those excess profits in a fund to benefit those who priced their premiums too low. Unfortunately, most insurance companies weren’t overly profitable so not enough money was added to help out the smaller insurers who needed it and many were forced to close up shop.

There are fewer choices among insurers

There are a declining number of insurer options to choose from. Competition is decreasing, which is bad news for the consumer, and insurers are losing money and needing to hike premiums in order to offer a sustainable product over the long-term.

The enrollment period for the Affordable Care Act is slated to begin on November 1, 2016. The Obama administration is predicting that 11.4 million people will pick health plans by the end of January – about 1 million more than the number of Americans with such coverage now.

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