It has become a depressing autumn ritual.
The state Division of Insurance publishes prices for the following year’s health insurance prices on the individual and small group markets. Consumer activists gasp at the high prices. Analysts say the prices are unsustainable and wonder how long this rapid inflation can continue.
It happened again today: Prices on Colorado’s individual market for 2018 health plans will rise an average of 26.7 percent. That comes on the heels of a 20.4 percent average increase for 2017.
The Colorado Health Institute (CHI) calculates that individual market prices have risen 68.7 percent since 2014, when the Affordable Care Act (ACA) took effect. Price increases on the small group market have been more moderate — 6.6 percent for 2018 and a total of 15.1 percent since the ACA began.
So is the ACA to blame for these high prices? Somewhat — but not to the degree the law’s critics allege.
Blaming the ACA is mostly killing the messenger. Before 2014, there was no way to compare insurance policies and track prices because the plans were so different. The ACA put in place a standardized way to track prices among different tiers of insurance plans.
But the ACA also told insurance companies they could no longer deny coverage or raise prices for people with chronic illnesses. The law enabled many people to get access to insurance for the first time in years. But it also brought more sick people into the risk pool, and insurance carriers have struggled to adjust their prices to account for this new group of customers.
Now add in the high price of medical care and the rapidly increasing price of prescription drugs — specialty drugs in particular — and you have a recipe for spiraling price increases.
As always, a couple caveats are in order. First, the steep price increases released today apply to a small minority of Coloradans — those in the individual market, which covers roughly 400,000 people. Second, many Coloradans will be able to get discounted coverage through ACA tax credits. People earning less than four times the federal poverty level (about $48,000 for a single person) qualify for subsidized coverage.
It’s probably not a coincidence that Governor John Hickenlooper is scheduled to testify to the U.S. Senate’s health committee on Thursday, a day after his Division of Insurance published the 2018 rate increases. Hickenlooper, a Democrat, is working with Ohio’s Republican governor, John Kasich, on a plan to stabilize the individual market and lower prices.
That plan relies heavily on federal funding for reinsurance — basically a pot of money to relieve insurance companies from the burden of their costliest customers. Alaska created such a pool two years ago, and it’s been widely credited with rescuing that state’s individual market from collapse.
Hickenlooper will call on Congress to make sure cost-sharing reductions (CSRs) get funded. This money is paid to insurance companies in return for discounts on out-of-pocket expenses to their lowest-income customers. The Division of Insurance estimates that without CSR payments, prices could rise up to 14 percent more than the high prices announced today.
Later this fall, the Division of Insurance will release data on rate increases by county and sample rates for gold, silver and bronze plans across the state. CHI will publish a detailed report on 2018 insurance prices when those numbers are made available.