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Feds Say Tax Credits Should Ease Sting Of ACA Insurance Rate Hikes

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U.S. Centers for Medicare and Medicaid Services
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Open enrollment on the federal health exchange for 2017 will begin on November 1st.

A new analysis from the U.S. Department of Health and Human Services says headlines about anticipated premium increases on the Obamacare health insurance marketplace overlook an important point: Most Americans, including two-thirds of Kansans and three-quarters of Missourians, still will be able to find a plan for $75 a month or less.

In an issue brief on the analysis, HHS says almost 90 percent of marketplace consumers qualify for tax credits to offset rising premiums.

Katie Martin, acting assistant secretary for planning and evaluation at HHS, said during a media call Wednesday that the agency examined costs for a hypothetical marketplace consumer facing premium increases of 10 percent, 25 percent or even 50 percent.

HHS found that insurance still would be available for $75 a month or less for 73 percent of consumers shopping on the federal marketplace, at www.healthcare.gov, once the tax credits are included.

“We know there has been speculation about rates in the marketplace, and we want to make sure that everyone understands that headline rate increases do not reflect what consumers actually pay,” Martin said. “Last year, despite headlines projecting double-digit rate increases, the average healthcare.gov premium increased just $4 per month for consumers with tax credits.”

During the last enrollment period, 87 percent of marketplace consumers qualified for premium tax credits because they had incomes between 100 percent and 400 percent of the federal poverty level. For a family of four, that’s annual income between $24,300 and $97,200.

The amount of the tax credit goes up in tandem with premiums for those who are eligible. That’s why the out-of-pocket cost for premiums is projected to remain roughly the same, even if the actual rates were to rise 50 percent instead of 25 percent.

The highest marketplace rate increase requested in Kansas for the coming year was 49 percent, although those rate requests still await approval by the Kansas Insurance Department.

The Missouri Department of Insurance has no information on requested marketplace rate increases for 2017. Governor Jay Nixon recently signed SB865, which will require rate review in Missouri for the first time for plans effective in 2018.

In an email, a representative of the Missouri department says it also has no information on which insurance companies will sell products on the 2017 federal exchange or the products they will offer, stating that Proposition E, passed by Missouri voters in 2012, prevents it from providing assistance with the federal marketplace.

Blue Cross and Blue Shield of Kansas and Minnesota-based Medica have proposed to offer 23 total insurance plans for the 2017 Kansas marketplace. Deputy Kansas Insurance Commissioner Clark Shultz said those numbers won’t be final until Sept. 23.

“They are still able to request changes,” Shultz said. “At this point, a company can still pull out.”

That’s what happened with Aetna’s Coventry division, which had proposed to offer 10 plans in Kansas. In July, Aetna warned the Obama administration that its operations would be financially unsustainable if Aetna was not allowed to merge with Humana. But the administration rejected the merger, prompting Aetna to announce its withdrawal last week from the marketplace in 11 states, including Kansas.  Aetna also withdrew from the Kansas marketplace in 2015.

“Why is the company leaving? They’re leaving because they’re not being profitable in this segment. So that becomes an obvious problem if that continues,” Shultz said.

Shultz said there are several possible reasons why premiums are going up. He thinks one of them is because the penalty for not buying insurance is too low to motivate some people to buy until they need it.

“A certain percentage of them are waiting until perhaps they are in need of medical care,” he said. “So it’s a little bit like having an auto accident and then being able to call your insurance agent and buy insurance that would cover you for that accident that you just had yesterday.”

HHS officials say marketplace consumers should check plan costs and coverage networks each year to help reduce the cost of their insurance. Last year 43 percent of marketplace consumers changed plans and saved an average of more than $500, according to the HHS publication.

As premiums rise and some insurance companies leave the marketplace, there are concerns that the marketplace may collapse.

But HHS spokesman Ben Wakana said health insurance consumers are in a better position since the marketplace was established in 2013 as part of the Affordable Care Act.

“We are confident that the marketplace will continue to bring coverage to millions of Americans next year,” Wakana said. “This is a marketplace that’s serving more than 11 million people right now, and it’s helped this country get to the lowest uninsured rate on record.”

Bryan Thompson is a reporter for KHI News Service in Topeka, a partner in the Heartland Health Monitor team.

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