A Project of The Annenberg Public Policy Center
FactCheck.org is celebrating 15 years of holding politicians accountable.

‘Skyrocketing’ Premiums


Party Lines Red InsertThe Line: Premiums and health care costs are ‘skyrocketing’ under the Affordable Care Act.

The Party: Republican

Several anti-Obamacare ads have made the claim that premiums or health care costs have gone up under the law. And “skyrocketing” is the word of choice in these attack ads. That’s misleading. Premiums for those who buy their own private insurance will go up or down, in some cases significantly, depending on individual circumstances. Employer-sponsored premiums, where most Americans have coverage, are not “skyrocketing,” and neither are health care costs. In fact, the growth of both has been at historically low rates in the past few years.

Three Americans for Prosperity ads in January used the word, including an ad against Michigan Rep. Gary Peters that said, “Families are losing their doctors and health care costs are skyrocketing.”

 

An AFP ad against Sen. Mary Landrieu of Louisiana said that “millions of Americans have lost their health care and millions more are facing skyrocketing costs.”

 

A third ad, this one against Iowa Rep. Bruce Braley, said, “Our plans canceled. Our doctors lost. Our premiums skyrocketing.”

 

And that’s not all. Another AFP ad supporting Montana Rep. Steve Daines said the congressman opposed Obamacare and “fought against rising health care costs.” Another ad against Sen. Jeanne Shaheen in New Hampshire said that “families are paying more for expensive health plans.”

Most Americans — 48 percent of the population — have insurance through their workplaces. Employer-sponsored premiums for family plans went up 3.8 percent on average in 2013, according to the Kaiser Family Foundation’s annual employer health benefits survey. Since the ACA was passed in 2010, those premiums have gone up 5.9 percent on average per year, while in the five years before the ACA, premiums went up 4.8 percent on average per year. Not exactly “skyrocketing.”

Overall national health care spending is growing at historically low rates. President Obama has boasted that “health care costs overall are actually going up more slowly over the last three years than in the last 50,” which is true. From 2009 to 2012, the growth has been under 4 percent per year. Drew Altman, CEO of the Kaiser Family Foundation, wrote in September 2012 of the slow recent growth in both premiums and spending: “These are strikingly low numbers to those of us who have been studying health costs for a long time.”

But, as we’ve pointed out a few times, experts, including those at KFF and the Centers for Medicare & Medicaid Services, say that’s mainly due to the slow economy. The ACA could be having some indirect impact, though, as Altman explained in a September 2013 column.

As more Americans gain insurance, and the general population increases, health care spending overall will go up. But costs per individual won’t necessarily go up; they’ll vary. National health care spending includes all spending on health care, by individuals, businesses, insurers, and the government.

A small increase in work-based premiums can be linked directly to the ACA. When family premiums jumped 9 percent from 2010 to 2011, experts told us that the law was responsible for a 1 percent to 3 percent increase, with the remainder due to higher medical costs. At the time, the law had required the elimination of preexisting condition exclusions for children, the coverage of dependents on their parents’ plans up to age 26, free coverage of preventive care, and the increase in caps on annual coverage.

It’s the individual market, where people buy their own coverage, and small-employer market that face the major changes under the law. And that’s where premiums can go up or down, perhaps significantly, depending on the individual. It’s difficult to draw general conclusions about what’s happened to people’s premiums in the volatile individual market, where policyholders frequently switch plans or leave the market. And it may remain difficult in the years to come. Five percent of Americans — about 15.8 million people — bought their own private insurance on this market in 2012, according to the Kaiser Family Foundation.

The market has seen great variation in pricing and the level of benefits offered. This makes it “difficult, if not impossible, to make generalized statements of the effect of the new law on premiums,” Linda J. Blumberg, a senior fellow with the Urban Institute’s Health Policy Center, wrote in a July 2010 report. And experts say that’s still the case.

In a September 2013 report, KFF said the changes in the market because of the law — such as essential health benefit requirements and no denial or price variation based on health status — “make direct comparisons of exchange premiums and existing individual market premiums complicated, and doing so would require speculative assumptions and data that are not publicly available.”

From 2009 to 2010, the average increase in individual market premiums, for those who had such coverage for more than a year, was 15 percent, according to a Kaiser Family Foundation survey. That’s five times the average increase for employer-sponsored family plans that year, and three times the average increase of employer plans for the five years before the ACA.

But premiums can vary state to state, with different state regulations, and person to person, as insurers were able to price based on medical conditions and gender. Under the ACA, insurers on the individual and small-group market are limited to pricing premiums based on family size, geography and, to a limited extent, age and tobacco use. Insurance companies also can’t deny coverage based on preexisting conditions.

That’s a major change in how those policies are priced. The obvious implication is that those with health conditions could well pay less in premiums than they did when their health was a cost factor. And the reverse is likely true: Healthy individuals could end up paying more. (For example, one Arizona man who has leukemia had been paying $855 per month for a single policy on the individual market; last fall he was able to find a cheaper plan. But his previous premium was also very expensive: In 2010, the Arizona per person per month average was $241, according to KFF. That means some would have had significantly cheaper plans than this man to begin with, and so, they may not have saved money with new insurance.)

The change in price would depend on what type of coverage one had before: Bare-bones plans have to be upgraded with more generous benefits and limits on out-of-pocket costs. Those added benefits may be welcomed by some and scorned by others who preferred a cheap plan with fewer benefits. The ACA requires individual market and exchange plans to include essential health benefits, including maternity coverage, prescription drug coverage and preventive care benefits. More generous benefits do cost more, and unless those moving to more generous plans also received subsidies, they probably paid more.

The other factor that impacts total out-of-pocket costs is whether one qualifies for federal subsidies, available to those earning up to 400 percent of the federal poverty level, which is $46,680 for a single person. The nonpartisan Congressional Budget Office has estimated that 80 percent of those buying policies on the exchanges — which would include at least some who previously bought their own insurance as well as those who didn’t have insurance — will qualify for subsidies, with an average subsidy of $4,700 in 2014.

So, are premiums “skyrocketing”? Overall, no. But some individuals who buy their own insurance could face significantly higher rates, depending on their health status, previous plan and other factors. Other individuals — particularly those with health conditions and those who qualify for subsidies — could pay less.

A series of Americans for Prosperity ads also claims that “millions are paying more and getting less,” a reference to those who had their individual market policies canceled because they didn’t meet the law’s requirements. But there’s no evidence of that, either.

A few of the personal stories that Americans for Prosperity has mentioned or highlighted in other ads show that some who were on the individual market are paying less. But while some will find better coverage and better deals on the exchanges — particularly if they qualify for subsidies — it’s certainly true, as we’ve said, that not everyone will come out on the “winning” side.

But “paying more and getting less”? We can’t say that there aren’t some individual cases that might fit such a description, and whether one gets “less” can be a subjective call. But there’s no evidence that “millions” are in such a predicament.

The millions of uninsured who are expected to gain coverage under the law may or may not pay “more,” depending on their medical costs and subsidy status. But they’re certainly not “getting less.”

— Lori Robertson