Obamacare Scare: Double-Digit Premium Hikes?

With some measures of Obamacare set to kick in next year, the health-care policy wars have taken on a schizophrenic quality. Large health insurance companies are warning individuals and small businesses to brace for significantly higher premiums. Aetna Chairman and Chief Executive Officer Mark Bertolini told CNBC on March 19 that there would be an average 32 percent premium increase for people buying their own policies starting in 2014. Fans of the Affordable Care Act (ACA) dismiss such talk as scare tactics. Ron Pollack, executive director at Families USA, a Washington-based consumer advocacy group, concedes that premiums may rise initially. But he cites an analysis by the Congressional Budget Office, which predicts that once the law’s hundreds of billions of dollars in subsidies and cost savings go into effect in 2014, total out-of-pocket insurance costs will fall by an average of 60 percent.

Who’s right? The answer likely hinges on two variables: how many people end up buying insurance and whether overall health-care costs continue their steep upward trajectory. No matter what happens, the health-care overhaul is expected to have little effect on premiums for the 150 million Americans covered through employers. The big changes will be felt by many of the 15 million people who buy their own coverage. Starting next year, they’ll be able to do so on the insurance exchanges created under the ACA. By 2020, the number of people buying insurance on these exchanges is expected to hit 26 million; it’s estimated that an additional 12 million will buy policies off-exchange. That should generate an extra $205 billion in annual premiums for insurers by 2021, according to an October report by PricewaterhouseCoopers.