Right-Wing Media Cry Wolf Over Phantom "Rate Shock" In Health Insurance Markets
Research ››› ››› CRAIG HARRINGTON
Right-wing media outlets are hyping disclosures that health insurance premium rates could "skyrocket" for some plans in 2016 as proof of the Affordable Care Act's failure as a national policy, ignoring the fact that these reported rates are skewed and not final, and that previous "rate shock" predictions have fallen flat.
Health Insurance Companies Request Rate Increases For 2016...
NY Times: Some Health Insurance Companies Seek 20 - 40 Percent Premium Increases In 2016. According to a July 3 report from The New York Times, certain health insurance companies nationwide are seeking to increase insurance premiums by 20 to 40 percent next year. The rate increases, some of which still must be approved by independent state insurance commissioners, could force customers to pay more for top-tier plans than they did last year if they choose not to buy less-expensive plans:
In their submissions to federal and state regulators, insurers cite several reasons for big rate increases. These include the needs of consumers, some of whom were previously uninsured; the high cost of specialty drugs; and a policy adopted by the Obama administration in late 2013 that allowed some people to keep insurance that did not meet new federal standards.
"Healthier people chose to keep their plans," said Amy L. Bowen, a spokeswoman for the Geisinger Health Plan in Pennsylvania, and people buying insurance on the exchange were therefore sicker than expected. Geisinger, often praised as a national model of coordinated care, has requested an increase of 40 percent in rates for its health maintenance organization.
Insurers with decades of experience and brand-new plans underestimated claims costs.
The rate requests are the first to reflect a full year of experience with the new insurance exchanges and federal standards that require insurers to accept all applicants, without charging higher prices because of a person's illness or disability. The 2010 health law established the rate review process, requiring insurance companies to disclose and justify large proposed increases. Under federal rules, increases of 10 percent or more are subject to review. [The New York Times, 7/3/15]
... But Only The Largest Increase Requests Were Publically Released
Slate: There Is "A Very Strong Chance" Huge Rate Increases Are "The Exceptions, Rather Than The Rule." A June 2 blog post by Slate explained that premium increase data released by the U.S. Department of Health and Human Services (HHS) offer little predictive information about average rate increases. In fact, "the administration has done nothing but offer a list of the companies that are seeking especially large bumps":
So what does this tell us about the overall state of the insurance market, and the effects of Obamacare on the cost of health coverage? In spite of what John Boehner might have you think, not much. Because, again, the administration has done nothing but offer a list of the companies that are seeking especially large bumps. "Trying to gauge the average premium hike from just the biggest increases is like measuring the average height of the public by looking at N.B.A. players," Larry Levitt of the Kaiser Foundation told the Times. Moreover, some states may ultimately end up rejecting the gaudiest requests if they're deemed unjustified.
How skewed is the federal database? Here's one telling illustration from ACAsignups.net founder Charles Gaba. In Washington State, 17 insurers submitted health plans for next year, requesting an average rate increase of 5.4 percent. Only three of those companies asked for a big enough hike to show up on the federal rate review site. Together, they requested bumps averaging 18 percent, more than three times larger than the actual statewide mean. That gap should make everyone think twice before drawing conclusions from yesterday's data dump. [Slate, 6/2/15]
Vox's Sarah Kliff: "Proposed Rate Increases Are Misleading." In a July 15 article on Vox, Kliff pointed out that the big increases making headlines are not "the new normal," according to experts. Not only were these proposed rate increases an "opening bid" for negotiation, they are not representative of "the most popular Obamacare plans":
"Oregon is the extreme," says Larry Levitt, a co-author of the Kaiser report. "If you look at the markets as a whole the increases still seem modest."
Separate research from Avalere looks at proposed rate increases -- which may differ from the actual rate increases -- for some of the most popular Obamacare plans: those that cost the least. Researchers found that premiums for the average second-lowest-cost silver plan and the average lowest-cost silver plan will rise 4.5 percent and 1 percent, respectively.
Oregon was among the first states to finalize rates for 2016, which helps explain why the big increases it approved got so much attention. But most of the rate increases floating around right now -- a 54 percent rate hike in Minnesota, for example, or a 36 percent increase in Tennessee -- aren't final. These are proposed rate increases -- essentially, the insurers' opening bid for a negotiation with regulators. Both Minnesota and Tennessee have to approve insurers' rates before they go to market.
Insurance regulators typically negotiate insurance rates downward. A 2011 Kaiser Family Foundation study looking at 98 individual market rate hike proposals found that the average increase dropped from 8.9 to 6.3 percent in the course of negotiations. [Vox, 7/15/15]
Yet Right-Wing Media Tout Worst-Case Scenarios To Attack Obamacare...
Newsmax: Insurance Premiums Could Rise "As Much As 54 Percent." A July 4 article by Newsmax warned of "dramatic rate increases [of] as much as 54 percent," citing the aforementioned Times article on isolated requested rate increases in several states. The article framed these isolated rate increase requests as representative of the national insurance market, focusing its headline and introduction on a single 54 percent rate request increase for a single Minnesota insurance plan. [Newsmax, 7/4/15]
American Thinker: Insurance Companies Look To Increase Prices By "40 Percent Or More." A July 5 blog published by the conservative American Thinker exclaimed that "insurance companies are requesting rate increases of 40% or more," citing the same Times report. The Thinker blamed "income redistribution" and alleged program use by "illegal aliens" for rising insurance costs. [American Thinker, 7/5/15]
Breitbart.com: "Skyrocketing American Healthcare Costs Are Becoming The Norm." A July 6 post by Breitbart.com misleadingly claimed that "skyrocketing American healthcare costs are becoming the norm - and will be a top issue in 2016." The article claimed that "healthcare premium 'sticker shock' is not limited to just a few states or insurers," but failed to acknowledge that reporting on rate increases is skewed by the fact that only those plans requesting increases in excess of 10 percent were disclosed. [Breitbart.com, 7/6/15]
WSJ: "Obama Is In Denial" Of Looming "Rate Shock." A July 10 editorial in The Wall Street Journal claimed that "Obama is in denial" about so-called "rate shock" in the health insurance market, citing the paper's own reporting on a handful of examples of large premium increase requests. The Journal acknowledged that "rate hikes aren't final" but rejected the fact that so-called "rate shock" had failed to materialize in previous years while hoping for an "alternative GOP agenda":
This is a no-excuses moment for liberals. In 2014-15 they tried to deny rate shock by claiming pre-ObamaCare plans couldn't be compared to compliant ones, but these are the apples of 2015 compared to the apples of 2016.
An alternative GOP agenda that promises more patient choice and control, and more competition and innovation, might well gain popular support--even among the voters ObamaCare was supposed to help. [The Wall Street Journal, 7/10/15]
Forbes: Health Insurance Premiums Will "Spiral Upwards" In The Future. A July 13 op-ed by Forbes contributor Sally Pipes pointed to reporting on specific premium increases to claim that "double-digit rate hikes are becoming Obamacare's new normal," while reiterating the common conservative media prediction of a looming "death spiral" for market-based exchanges:
This situation will only worsen in the coming years. As premiums spiral upwards, the young and healthy will increasingly decide that insurance isn't worth the cost. Many will opt out of the market altogether.
That will leave insurance risk pools to be comprised primarily of older, sicker patients. To cover the costs of insuring this population, insurers will have to increase rates even higher. More people will find these new premiums unaffordable -- and they, too, will drop their coverage.
As this process repeats, the insurance market will descend into chaos -- what industry experts call a "death spiral." [Forbes, 7/13/15]
...Even Though Previous "Rate Shock" Warnings Fell Flat
Conservative Media Warnings That Health Care Costs Would "Skyrocket" Have Been Wrong Before. In 2014, several conservative media outlets predicted that health care costs would "skyrocket" as a result of the ACA's restructuring of the private insurance market. A March 19, 2014 article in The Hill created a right-wing media firestorm when anonymous insurance industry sources hinted that premiums could "double in some parts of the country," leading some outlets to warn that premiums could rise by 300 percent. On another occasion, Fox News co-opted the findings of a December 2014 HHS report on "modest" premium increases to decry costs being "driven through the roof." [Media Matters, 3/20/14, 12/27/14]
HRI: Nationwide Premium Increases "Hover[ed] In The Single-Digit Range" For 2015. According to market research performed by PriceWaterhouseCoopers' Health Research Institute (HRI), in the seventeen states plus the District of Columbia with final rate announcements, the average premium increase from 2014 was 3.7 percent. The average premium increase from "all reporting states" was 5.4 percent and "average rate increases hover in the single-digit range" nationwide, with some volatility from state to state. [PriceWaterhouseCoopers, Health Research Institute, updated 6/26/15]