Why are the media celebrating a 7.5% ACA premium increase?

2016 Marketplace Affordability Snapshot, October 26, 2015

The 2016 Affordability Snapshot provides a review of the final rate increases for second lowest cost silver plans, known as benchmark plans, which will be available for purchase in the 37 states that used the platform in 2015, including those in the Federally-facilitated Marketplace, State Partnership Marketplaces, and supported State-based Marketplaces.

Across all 37 states that used the platform, the cost of the benchmark plan will increase on average 7.5 percent in 2016. These increases do not take into account advanced payments of premium tax credits, which lower the monthly costs for the overwhelming majority of Marketplace consumers.

The second-lowest cost silver plan is notable because it serves as the benchmark plan to calculate the amount of advanced premium tax credit consumers may be eligible for to help lower the cost of their Marketplace coverage.


Consumer Price Index Summary

U.S. Bureau of Labor Statistics, October 15, 2015

Consumer Price Index for All Urban Consumers (CPI-U)

Percent changes, unadjusted 12 months ended September 2015

0.0%  All items

1.9%  All items less food and energy

2.4%  Medical care services

2.7%  Medical care commodities



By Don McCanne, MD

Although there are many variables that produce a wide variation in premiums for plans offered in the health insurance exchanges (Marketplaces), the second lowest cost plans in the silver tier serve as the benchmark for premium tax credits and thus can provide an anchor for determining health care inflation as reflected by the premiums for the plans offered by the exchanges.

Many reports in the media today are celebrating the fact that average increases in the benchmark premiums were held to a single digit. But these increases in insurance premiums were about 5% greater than the consumer price index (CPI-U) increases for medical care services and commodities, and a 7.5% increase over CPI-U for all items.

Our health care financing system that has been heavily dependent on private insurance plans has been ineffective in slowing health care inflation to sustainable levels. The Affordable Care Act was supposed to have made health care more affordable by creating a separate competitive market of regulated private plans within government-operated insurance exchanges.  With a 7.5% increase above the CPI-U, we can say that this experiment with private health plans has been failure.

If we want affordable health care for all, we need to eliminate the private insurers and establish a single payer national health program. As Fareed Zakaria said last week, “It's absolutely clear that is the only way you can achieve that goal.”