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Obamacare Premiums Will Increase Faster Than Private Plans, CBO Says

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Obamacare health insurance premiums will grow faster than either private policies or the federal government in coming years, according to the Congressional Budget Office.

In a report released Monday, the CBO issued updated budget projections showing that “premiums for policies sold through the exchanges are expected to increase more rapidly than the underlying trend in spending” between 2016 and 2018.

The CBO projects that the average premium for Obamacare policies will increase by 8.5 percent annually in those years, while federal spending is expected to grow by just below 5 percent per year over the same period. (RELATED: HHS Finally Admits Obamacare Premiums Are Rising)

The report identifies two possible reasons for the projected increase:

First, “reinsurance payments that the government makes to insurance plans whose enrollees incur particularly high costs for medical care will be phased out over the next two years,” which will force insurers to raise premiums to make up those costs. (RELATED: Obamacare Year One: 78 Percent Premium Hikes)

According to Investor’s Business Daily, “The White House delayed phasing out its three-year reinsurance program in 2014,” which have allowed insurers to collect reimbursements once a patient’s costs top $45,000 through 2015. Starting in 2016, though, “reinsurance won’t kick in until costs top $90,000”– something the IBD says “could add about 5 percent to premiums next year.”

In addition, “plans initially offered through the exchanges appeared to have, in general, lower payment rates for providers, narrower networks of providers, and tighter management of their subscribers’ use of health care than do employment-based plans.” The CBO anticipates that, “many plans will not be able to sustain such low provider payment rates or such narrow networks over the next few years, placing upward pressure on exchange premiums.”

In contrast, the CBO projects that, “private health insurance spending per enrollee will grow by an average of 4.3 percent per year over the 2014–2018 period,” which represents “a downward revision in such spending of roughly 5 percent in 2016,” compared to previous estimates. (RELATED: Community Centers Warn That Poor Won’t Keep Paying Obamacare Premiums)

The report claims that, “after 2018, exchange premiums will grow roughly in line with the underlying trend in private health insurance spending,” though the CBO does caution that, “projections of spending by private health insurers are highly uncertain, especially because the causes of the pronounced slowdown in spending in the past several years are not well understood.”

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