Obamacare Premiums Will Skyrocket Next Year

Of course they will. We wrote last week:

Insurance companies set premiums based on experience. When they lack experience, as with Obamacare, they make assumptions. One assumption that carriers used in setting 2014 premiums was that a bailout would be available if premiums turn out to be too low. The law establishes “risk corridors” for individual and small group insurance, under which the government will reimburse insurance companies’ losses, up to a point. The risk corridors encourage insurers to quote lower premiums, since they are protected (again, up to a point) by the federal government. But the risk corridor provisions of the act expire in 2016.

Even more fundamental is the composition of the risk pool in the Obamacare exchanges. The economics of Obamacare, and therefore the premiums charged by insurers, depend entirely on how healthy or sick the people who enroll in Obamacare turn out to be. The Obama administration made projections on this subject, as did the insurers. I don’t think there is any doubt about the fact that actual enrollments in the exchanges have been disappointing from this standpoint. There are nowhere near as many young, healthy people signing up as will be required to make the system work. This is why the Obama administration has embarrassed itself in trying to recruit young people into the program, with Pajama Boy, Obama’s pathetic “Between Two Ferns” interview, Angry Mom, and so on. What this means is that once the insurance companies are able to set premiums based on actual experience, as opposed to rosy projections, those premiums inevitably will rise due to the risk pool being lower-quality than predicted.

Today the Hill headlined, based on information from insurance industry sources: “O-Care premiums to skyrocket.”

Health industry officials say ObamaCare-related premiums will double in some parts of the country, countering claims recently made by the administration.

Why will Obamacare premiums rise so much next year? The main reason is the poor composition of the risk pool on the exchanges:

“I think everybody knows that the way the exchange has rolled out … is going to lead to higher costs,” said one senior insurance executive who requested anonymity.

The insurance official, who hails from a populous swing state, said his company expects to triple its rates next year on the ObamaCare exchange.

It is important to note that, while the increases will be most dramatic in the individual market, employer-sponsored group policies will also become more expensive due to Obamacare’s mandates:

In Iowa, which hosts the first presidential caucus in the nation and has a competitive Senate race this year, rates are expected to rise 100 percent on the exchange and by double digits on the larger, employer-based market, according to a recent article in the Business Record.

Insurance carriers will announce their 2015 rates over the summer, although, as the Hill notes, some “could also leak their rates earlier as a political statement.” So the rolling disaster of Obamacare has just begun to plague Democrats running for election in November. Which is why RNC chairman Reince Priebus is predicting that the election will be a “tsunami” for Republicans.

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