There’s a been a lot of buzz in the news lately about Obamacare premiums significantly spiking next year. What’s flying under the radar, however, is that rates on commercial health plans (plans not sold on Obamacare exchanges) will also rise. As we make our plans for health care next year, both for ourselves and our employees, it’s important to prepare for these changes.
A recent survey of commercial insurance brokers, conducted by Morgan Stanley, captured the rate of increase in premiums. For 2016, the brokers reported that average individual rates would rise again, from 11.2% in 2015 to 12.6% in 2016. Small group rate plans would also rise, from 11.7% last year to 13.5% in 2016.
To be fair, inflation in insurance costs is nothing new. In fact, it’s become such a way of life that Wall Street doesn’t even track the average premium hike, but instead only measures how much these increases are rising or falling (and they’ve been rising consistently over the years). But the ACA promised we’d see the average health insurance plan get cheaper, and at this stage of the Obamacare cycle we should see that. So far it just isn’t happening.
Individual and small group plans are the hardest hit by Obamacare since so many of the rules directly target these markets. There was a belief that many of the costly Obamacare mandates would be a one-time charge, and after health plans absorbed the cost of the new regulations, and rates spiked to reflect these charges, the inflation in premiums would begin to slow. But the annual rise in the cost of insurance coverage continues to expand, suggesting something far more complex is underway. Competition in the market is decreasing, and we see it reflected in the price of coverage.
Obamacare supporters often claim that the ACA is working because the cost to employers for providing health insurance is leveling out. But this has little to do with the ACA. The price of providing coverage to workers is leveling off mostly because more of the costs are being shifted to workers -- through high deductible health plans, rising co-pays, and cheapening coverage. Perhaps you’ve already experienced these changes in your own healthcare. As employers, we need to make decisions that keep us in business, and in an age of rapidly rising health health care costs, that unfortunately means our employees will share some of the burden.
There is not much we can do except prepare our finances for these changes and keep ourselves educated on all the options for health coverage. Are you prepared for 2016? It’s almost here.