Texans are now knee-deep in the Affordable Care Act’s second open enrollment period.
Many are finding what appears to be a pleasant surprise: Average premiums for the cheap “bronze” plans have increased by 3.9 percent, while premiums for the middle-of-the-road “silver” plans are rising by 4.1 percent. The Affordable Care Act’s naysayers predicted double digit spikes, or worse.Those naysayers should have read the law more carefully. The real premium spikes won’t occur until January 2017 — conveniently after the next presidential election.The Medical Industry Leadership Institute, where I am director, recently released an analysis predicting how the ACA will affect prices over the next few years. We estimated that single- and family-plan premiums in Texas could increase by low single digits for 2015 — a prediction that has been largely borne out. As for 2016, we estimate that family and individual bronze plan premiums could change by 2 percent and minus-1 percent, respectively.The next year, 2017, will be the real test. The law contains two programs that will expire at the end of that year: “Risk corridors” and “re-insurance.”Both programs conceal health insurance’s true costs — which actually have skyrocketed thanks to the ACA’s mandates and regulations.Risk corridors and re-insurance subsidize insurance companies with taxpayer money. Risk corridors give insurance companies money if their customers spend more on health care than the insurer estimated; reinsurance allows insurance companies to bill the federal government for particularly expensive patients.Both programs ultimately allow insurance companies to charge artificially low premiums for their health care plans.The Affordable Care Act’s authors created these two programs for a specific reason: They would ease the transition from the pre- to the post-ACA health care system. In the post-ACA world, health care is more expensive — a fact borne out by 2014’s average 41 percent spike in base premiums. Reinsurance and risk corridors have largely hidden these price increases from consumers for the past year; they will continue to do so until Jan. 1, 2017.Our study estimates that once the two subsidies expire, premiums for a cheap bronze plan in Texas could increase by a staggering 171 percent for individuals and by 72 percent for families.The federal government will have to act to prevent yet another round of anti-ACA blowback. Washington has two options: Extend the insurance company subsidies or increase federal subsidy rates to match the rising premiums. Neither option seems politically feasible. Either or both would potentially add tens, perhaps hundreds, of billions of dollars to annual federal deficits.And the Affordable Care Act was sold on the promise that it wouldn’t add, in the president’s words, “a single dime” to those deficits.Then again, that won’t actually be President Obama’s problem. Voters in Texas and across America will already have chosen his successor once this crisis becomes apparent. One thing is certain: The debate about the Affordable Care Act is nowhere close to ending. Stephen T. Parente is the associate dean of the Carlson School of Management and director of the Medical Industry Leadership Institute at the University of Minnesota.Have more to add? News tip? Tell us
