Healthcare Premiums Could Skyrocket in 2016

The cost of Obamacare could significantly rise next year, as New Mexico insurer, Blue Cross Blue Shield, proposed to hike premiums by 50%. Although this is an outlier, health insurer experts do predict that premiums will rise significantly in 2016. According to PwC's Health Research Institute, premiums increased by an average rate of 5.4% in 2015.

Nonetheless, Monday is the deadline for publishing and providing an explanation for premium increases greater than 10%. Some possible reasons for the rising premiums can be attributed to the knowledge that the carriers have of the health status and care trends of their new customers, rising drug prices (pharmacy costs increased by 11% in 2014), and the reduction of certain ACA programs that were designed to reduce the risk for insurers who entered the Obamacare marketplace (the "risk adjustment" program has already been reduced from $10 billion in 2014 to $4 billion in 2016). Furthermore, insurers are still dealing with the economic disruption that noncompliant plans caused in the marketplace, since they are still allowed to exist until 2017. The uncertainty in the marketplace is the main cause of the increased rates.

The rising costs will also significantly impact the 2016 presidential contest, as Republicans want to undo the democratic Obamacare. The rate setting is also occurring simultaneously with the King v. Burwell lawsuit, which is expected to have a ruling in late June. A defeat for the federal government will result in an elimination of subsidies in at least 34 states that use federal health insurance exchange. A number of states, including Texas, are allowing insurers to submit two sets of rates depending on the court's decision.

Summary by Caroline Smith

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Caroline Smith is currently a senior at the University of Notre Dame and is a contributor to Medical Groups. She is majoring in Science-Business and Spanish. After graduation, Caroline plans on entering the field of healthcare consulting. She is most interested in the evolving policy changes in the healthcare industry and enjoys learning about new technologies that are being developed.