Over the past year, our coverage of the Affordable Care Act (ACA or “Obamacare”) has reinforced something we already knew: The experts on the topic are often wrong, but seldom in doubt. (We explained the reason last week why it’s hard to get past the noise of competing narratives when it comes to politics and the economy.) That said, here goes:
(via: NYTimes.com You’re the Boss blog) (Based on reporting and anecdotal evidence), rate increases facing most employees insured through a small business* will be considerably lower than the dire predictions. By and large, it appears that the increases will be less than 10 percent. In some cases, they will be near zero — and at least one state is claiming the average rate increase will actually be a rate reduction.
If you asked someone in the health insurance industry earlier this year — the executives at the insurance carriers or the brokers and agents who sell their policies — the word on premiums was grim. In March, an unidentified insurance industry executive told The Hill that “everybody knows” that the way the exchange has rolled out “is going to lead to higher costs.” Then in April, a survey of insurance brokers by Morgan Stanley found that insurance premiums for small businesses were rising, on average, 11 percent, and at least 20 percent in 15 states. In Washington state, according to the report, small group rates were rising at the astounding rate of 588 percent.
Now it is October, and many states are finalizing rates in the small-group market for next year. And we are learning, anecdotally, that the rate increases facing most employees insured through a small business will be considerably lower than the dire predictions. By and large, it appears that the increases will be less than 10 percent. In some cases, they will be near zero — and at least one state is claiming the average rate increase will actually be a rate reduction.
Examples of states that have agencies providing some guidance on the rates they estimate:
Montana: An unweighted average** increase of 1.1 percent.
New York: A weighted average increase of 6.7 percent. The range of change runs from a 14.6 percent decrease to a 14.4 percent increase.
Rhode Island: A weighted average increase of 6.3 percent.
Vermont: The state’s dominant small-group insurer will go up by 7.7%.
Oregon: The state insurance division announced that rates for compliant small-group plans will fall by 5.8 percent in 2015.
Continue reading: “How Fast are Small-Business Insurance Premiums Rising? (
*Small businesses with fewer that 50 employees are exempt from the requirements, provisions and penalties of the Affordable Care Act (i.e., they don’t have to provide employees health insurance coverage). That said, the federal Agency for Healthcare Research and Quality estimates that 36% of small businesses with less than 50 employees do provide such coverage. Those small businesses which do provide coverage are subject to the provisions of the ACA, and so, therefore, when you read about small business premiums going up, the reference is to small businesses that (1) Have more than 49 employees or (2) Have chosen to provide healthcare insurance as an employee benefit voluntarily. If the have chosen this option, those companies are subject to (and benefit from) the provisions and requirements of the ACA.
**Unweighted averages take the amount of the percentage increase/decrease of all carriers and average them, ignoring the market share of each carrier.
Insurance Company A covers 90% of the market and is increasing its rates by 3%.
Insurance Company B covers 10% of the market and is increasing its rates by 15%.
Unweighted average rate increase: 9% (3+15)/2=9
Weighted average increase: 4.2% (.9×3)+(.1×15)=4.2