4 Reasons insurance Premiums WILL rise next year

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1. The Mix of Enrollees
Insurers say that people signing up for insurance through the new exchanges tend to be older and unhealthy. This is bad news for the Obama administration, which has stressed that younger enrollees are crucial to making the law work since they offset the costs of insuring older, sicker individuals. Early on, the White House said its goal was to have young people make up about 40 percent of total enrollees. However, the latest enrollment figures through March reveal they only make up about 27 percent of total enrollees.

Insurers have previously sounded alarms that if the administration doesn’t get enough young and healthy people to sign up, a so-called “death spiral” could occur. Though most insurers and even critics of the law don’t think a death spiral will happen, they are concerned that the enrollees—who skew older—will be a factor in raising the cost of premiums next year.

2. Administrative Rule Changes’ Impact Enrollment Numbers
When the president announced that people could stay on their non-ACA compliant policies through 2016, many Americans decided to keep their old plans, even though insurers assumed would buy coverage on the new exchanges. Since these plans are less expensive and tend to be held by younger people, the change could mean that the risk pool will shift further toward older, sicker Americans.

“We’re exasperated,” an insurance executive told The Hill. “All of these major delays on very significant portions of the law are going to change what it’s going to cost.”

3. Adjusted Medical Loss Ratio
The Obama administration is expected to announce a tweak to a provision in the law that sets a minimum medical loss ratio (MLR), Kaiser Health News reported. Under current law, insurers are required to put at least 80 percent of their total premium revenue from individual and small group market plans toward medical payments or consumer rebates, with the rest going to administrative costs and profits.

The whole idea of the law was to limit insurers’ profits and keep premiums stable. However, the rule change would alter that limit and allow insurers to spend more on administrative costs in order to help insurers cope with the rocky rollout.

4. Insurers Underpriced Plans This Year
When insurers set their prices for this year, they had to estimate what the mix of enrollments would look like. Some insurers underpriced their policies, with the intention of raising their rates the second year when they had a better idea of what to expect.

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