Affordable Care Act's 2017 Premium Increases Come With Some Offsets

A new period of open enrollment for health insurance under the Affordable Care Act runs from Nov. 1 2016 through Jan. 31, 2017. As that period has approached, most of the public discussion and media coverage about the ACA has focused on the fact that premiums for many insurance policies will likely be going up and that the number of available plans is decreasing. But the law also creates subsidies for a broad range of people buying policies through federal or state exchanges, and those will be increasing as well.

Wisconsinites seeking coverage under the Affordable Care Act shop for it through the federal exchange at HealthCare.gov, because Wisconsin opted not to create a state-level exchange. Known as the Health Insurance Marketplace, the federal exchange offers several provider options in most of the state's counties.

Bobby Peterson, executive director of the Madison-based public-interest law firm ABC for Health, discussed the increasingly complicated health-insurance landscape in a Sept. 9, 2016 interview with Wisconsin Public Television's Here And Now.

Based on Peterson's comments and several sources of data about ACA plans, there are a few things important to keep in mind when weighing Health Insurance Marketplace options in Wisconsin for 2017.

More people will be eligible for subsidies in 2017.

About 1.3 million Americans who had ACA health plans in 2016 and the 2.5 million who had non-ACA insurance last year will become newly eligible for subsidies in the marketplace in 2017, according to an October 2016 report from the U.S. Department of Health and Human Services. People making between 100 and 400 percent of the federal poverty level can get different amounts of support, if the pre-subsidy cost of their insurance plan exceeds a certain percentage of their income. That latter percentage also varies by income bracket. For instance, in 2015, an individual or household right on the poverty line would be eligible for a subsidy if their premium (pre-subsidy) took up more than 2.01 percent of their income, but someone making between $35,010 and $46,680 per year would need to spend 9.66 percent of their income (again, pre-subsidy) on a policy to be eligible.

Subsidies take two forms: A tax credit paid directly to the buyer's insurance company, and cost-sharing reduction, which lowers the policyholder's of out-of-pocket costs for services covered under the plan.

The Kaiser Family Foundation has created a calculator to help people figure out if they're eligible for a subsidy. It currently relies on standards for 2016 policies, but the foundation notes it will be updating the calculator with 2017 information soon.

In Wisconsin and in the nation as a whole, the federal government expects subsidies to increase at a greater rate than premiums — in part because higher premiums means people pay a higher percentage of their incomes for insurance, which makes them more likely to get a subsidy. Both increases are lower in Wisconsin than for the country as a whole, as is the difference between them. In the U.S., premiums are projected to go up by 22 percent and subsidies 47 percent, while in Wisconsin, premiums should increase by 16 percent and subsidies by 28 percent.

The HHS report also projects that 77 percent of current ACA marketplace customers in the U.S., and 69 percent in Wisconsin, will be able to buy a plan for $100 or less per month after subsidies kick in. All in all, this means Wisconsinites have some protection from rising health insurance costs, but a bit less than Americans on the whole.

It's important to remember these projected premium and subsidy increases reflect state and national averages, and that some plans will likely get much more expensive while others actually get cheaper.

"I think it's important for people, if they're in the marketplace, to look...some of the plans actually have lower costs heading into next year," Peterson said on Here And Now. "It's important to shop around."

Previously, premiums were artificially low.

Though created by the federal government and some states, the ACA exchanges are still essentially market-driven and subject to market forces. In 2016, several major health insurers decided to stop offering plans for Wisconsin on the exchange. These companies said they're losing money on ACA plans because, in short, people were using the insurance they purchased. Bloomberg Businessweek reported that insurer Humana said "members who stayed with the company's individual Obamacare policies from 2015 to 2016 were more likely to be hospitalized or use pharmaceuticals than those who had plans and dropped them, contributing to increased costs."

This pattern gets at one of the factors driving up pre-subsidy premiums for 2017. Before the ACA, insurers could deny or drop coverage for people with expensive-to-treat illnesses or chronic conditions, or charge higher premiums for people with poorer health. Now they are barred from doing any of that. Insurers are now spending more of their revenue on actual health care, and those costs get passed on to their customers. The ACA also requires insurers to spend at least 80 percent of premium revenue on actual healthcare costs. And during the first couple years of the exchanges, insurers also saw opportunities to attract new customers, and Peterson said that caused them to entice people with artificially low prices.

"When the insurers got into the marketplace, they offered bargain prices because they wanted to build up market share," he said "So it's the introductory price, it's the low price, it's trying to get people in and comfortable with their plans."

Making good decisions about health insurance is tough.

The ACA undoubtedly made the health-insurance market more confusing for millions of Americans — because of its various complexities and bumpy rollout, but also because of the plentiful political disinformation surrounding it. Long before the ACA, though, consumers needed a skill set to wisely purchase and use health insurance. University of Wisconsin-Extension staff, though the ACA navigator entity Covering Wisconsin, have detailed what consumers need to know about being a health-insurance consumer, and how they can go about making decisions that will benefit them and their families:

• Understanding Health Insurance Plans Requires Consumer Literacy


• How To Navigate Health Insurance Networks And Specialized Care


• What To Do When Medical Bills Pile Up

Editor's note: This article is corrected to note that 9.66 percent or less of an employee's household income is the threshold for determining affordability of a jobs-based health plan in the Affordable Care Act.