As the second open enrollment period has been posting strong enrollment numbers and a wider acceptance of the law, there is a surprise winner in the falling, or stable in some cases, Obamacare premiums. As opposed to experts and the Administration’s guesses, the premiums for most insurance plans across states are either falling or staying constant, with only a few states recording premium increases in just a few plans.
Across 48 major cities, the premiums for Silver plans are falling by roughly 0.2 percent. For Bronze plans, there is a minor rise of roughly 2.7 percent across these states. However, business owners are actually experiencing a reverse trend of premium increases across the country. If the benefit consultants of these businesses are to be believed, the premium increases will be steeper in the coming year. As per a report available from CMS, nearly 66 percent of small businesses will see a slight increase in their premiums under Obamacare, while some businesses can expect an increase of up to 30 percent. When individual premiums are showing a steady decline in most regions, what’s the reason behind this uniform increase in premium prices for businesses? Let’s find out.
Change In Industry Insurance Ratings
In the pre-health reform days, the insurance industry used to work on the concept of industry ratings. These industry ratings were assigned to each business and were responsible for governing health insurance premiums for the industry. A few variables contributed to this industry rating calculation, with the concept of safety in the job being one of the variables. For instance, a software engineer’s job was considered a lot safer than that of a construction worker. The safer the industry was, the lower the health insurance premiums were. Other than the concept of safety, a company’s health claim history was also one of the popular variables that influenced the rating. However with the Affordable Care Act, the existing concept of insurance ratings was changed to reflect a more standard version. Now, the insurance ratings are governed by the location of business, age of employees and tobacco use status. Since the act does not discriminate on the basis of health status of employees, companies with unhealthy employees will not be penalized anymore, thereby encouraging companies to not let go of such employees. Although the Affordable Care Act has implemented this concept for leveling the ground for all companies, it means that companies which otherwise had lower insurance premiums will now experience higher premiums. When you compare that with the majority of businesses in America, premiums are expected to go up for most businesses.
Absence of Risk Corridor Benefits
While enacting the Affordable Care Act, the Obama Administration was wary about the participation of health insurance plans in the exchanges to make the whole thing work. The administration wanted maximum health plans to enter the exchange market, and for that, they designed the facility of Risk Corridor Program. Under the Risk Corridor Program if the insurance plans’ costs exceed 103 percent of their projections, the federal government would reimburse 50 percent of that amount. Similarly if the excess was more than 8 percent, the reimbursement would be 80 percent. The Risk Corridor Program enabled most health plans to keep their premiums competitive, participate in the exchanges and gain market share while making the exchanges successful. While this was one strong way to make the insurance plans participate in the exchange setup, this program is set to expire at the end of 2016. Furthermore most organizations are not yet shopping through exchanges, thus you are not getting the benefit of the Risk Corridor Program. When the program stops buttressing the effect of costs on these health insurance plans at the end of 2016, it wouldn’t be a wonder if participating plans jack up their prices to cover their costs and stay profitable.
Due to these two prime reasons, corporations cannot hope to have as lucrative health insurance premiums as in the individual or SHOP health plans. By 2017, however, there should be a major shift in the current movement of premiums for both individual and corporate markets.