Why are Premiums Increasing So Much in 2017?
Wasn’t the Affordable Care Act supposed to reduce premiums? We have seen premiums increase up to 75% in California the last three years since the ACA was passed! What is going on?
Unfortunately, we are seeing very large premium increases 2017.
One of the main reason for this is that the ACA (Affordable Care Act) had a 3-year budget with a term called “re-insurance”. This was buried deep inside the thousands of pages of the Affordable Care Act. What this mandated was that every individual and group plan were taxed each month. These funds were paid in to a pool for carriers to access to withdraw funds to cover the large amount of losses from the newly un-insured. Many company plans saw this “line item” on their monthly bill. Individuals taxed were embedded in the premium and not lined-out. For many of our groups it was hundreds of dollars or tax money each month re-distributed to the exchanges for carrier’s claims/losses.
Over the past 3 years two of the largest carriers in CA (which are non-profit) lost hundreds of millions of dollars inside Covered CA and the Individual/Family market outside the exchange as they were forced to accept everyone-regardless of pre-existing conditions. To offset the large amounts of claims and losses the re-insurance “pool” allowed them to get reimbursed. As a result, we saw rate increases less than 5% (on average) for the last three years.
The ACA greatly underestimated the true cost of the claims when they budgeted the re-insurance contact as they thought after 3 years the claims would go down. This contract has expired and now the carriers have nowhere to go for “relief” funds and must charge the rate payers to offset the claims. You are now seeing the true premium (without re-insurance) for the ACA mandated coverage. There is strict regulation by the Department of Insurance and these premium increases were highly scrutinized prior to approval by the DOI. They were approved as the DOI realized the actual claims that were paid were massive.
Please remember that $.80 on every dollar collected must be put towards claims (ACA). They carriers only have $.20 left to run their business. The carriers are operating on very tight margins to stay in business and two of the four largest carriers are non-profit. This year we saw United HealthCare (the largest US carrier) leave California due to this risk. This is unhealthy for the industry.
The second reason we are seeing large increases in California is that Covered CA has mandated lower premiums for point of service procedures. Lower co-pays translate to higher premiums.
In some situations, subsidies are going up so although your premium may have had significant increases it may be offset.
There are new HMO carriers in certain counties. They are coming in with very small HMO networks. This may be a way to offset increases. However, many doctors are not accepting these small HMO due to very low reimbursement rates.
Please call us now to schedule an appointment either here in the office or by phone. We are going to be extremely busy during open enrollment. So, if you have a scheduled appointment you will have our full attention.
We are also offering Home-Auto from carriers such as Mercury, SafeCo, Allied and more. Additionally, we have in home mortgage financing from over 75 lenders. So, if any of these additional services are of interest please let us know.
Additionally, we have great markets for Life and Commercial plans.
Please note we have moved in to a new office. The new office is twice the size, offers convenient parking and allows us to better service our customers.
Thank you for your continued trust and support.
As with every year we are here to help and answer questions. You can reach us at 877-840-0554.