The Impact of Obamacare on Health Insurance Premiums

The impact of Obamacare on health insurance premiums will vary from individual to individual. Some people will get premium reduction through subsidies and tax credits. But many Americans with private health insurance will see higher rather than lower premiums. This is primarily because Obamacare will provide insurance for more people; including 37 million uninsured Americans. Under Obamacare everyone will be eligible for insurance, i.e., no coverage will be denied to anybody because of pre-existing conditions.

According to the Wall Street Journal health insurance companies forecast a premium increase of up to 50% for some families. The average increase for small groups is estimated to be 13%-23%.

Below are some factors that may influence the insurance premiums.

Obamacare: Factors that May Impact Health Insurance Premiums

The existing Obamacare Cost Estimations are just what they appear to be – estimations. If the real costs will be much higher, you may expect higher premiums across the board.

With new expanded benefits (no pre-existing conditions, no annual and lifetime limits), the role of the uninsured population becomes critical. Without them (many of whom are young and healthy) the risk pool will become weaker. But even with the Individual Mandate which requires everybody to have insurance coverage, nobody knows for sure how many people will actually buy the insurance coverage. Without the enrollment of the uninsured, the impact on insurance premium may be dramatic.

Medical Loss Ratio requirement will be a factor limiting an unreasonable rate increase. It dictates that 80%-85% of premiums will be spent on medical costs. The insurance company that does not meet this requirement must pay rebates to their policyholders.

Finally, one of the most important factors in the rise in health insurance premiums is the ever-increasing costs of medical services. One of the main goals of Obamacare is to bend the health-care cost curve, but it has a long way to go.

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