Jan. 1 will mark the third anniversary of the Affordable Care Act’s implementation in Minnesota. So how is the law playing out in our state?
Not well. Roughly 60,000 people purchased health insurance on the state’s ACA online exchange last year, but this year those purchasing plans likely found an unpleasant surprise. Monthly premiums for their plans will be 47.66 percent higher, on average, than they were in 2015. Deductibles and out-of-pocket costs are also on the rise, and provider networks are narrowing. The combination helps explain why the federal government recently halved the number of people it expects to sign up for the law’s health insurance.
Yet while the outlook for the Affordable Care Act is already bleak, it will likely become even worse.
That’s the result of an analysis I recently conducted. Using the latest insurance-exchange enrollment data and a model funded in part by the U.S. Department of Health and Human Services, I estimated how the ACA will affect the health insurance market over the next decade.
In brief: Costs will continue to rise, and coverage will continue to underwhelm. In fact, coverage will likely begin declining in the next few years, leaving millions more Americans uninsured than today.
The looming premium increases in Minnesota show that next year will be particularly rough, but subsequent years will also be costly. I project that premium increases for 2017 health insurance will average 7.4 percent for individual plans. Family policyholders will likely pay 6.2 percent more. That trend will hold for years to come; the ACA’s tax dollar assistance programs for insurers, known as “risk corridors” and “reinsurance,” will expire at the end of next year, leading to further growth in premiums.
Over the next decade, I estimate that individual and family policyholders will see rates increase more than 61 percent by 2025. That comes to $5,500 a year for individuals and $23,500 for families, on average.
Even federal subsidies will not be enough to cover these costs. Just between 2016 and 2017, policyholders should expect to pay $600 more in premiums, after subsidies. As premiums continue to increase in subsequent years, that out-of-pocket cost will rise correspondingly. Minnesotans with individual and family plans, respectively, can expect to pay $2,000 and $8,000 more a year by 2025.
This leads to the second component of my study — decreases in coverage. As costs rise, they will discourage people in Minnesota and across the country from purchasing any health insurance at all.
This is happening already. Last year’s data show that the IRS fined approximately 7.5 million Americans for choosing to forgo health insurance entirely, even though the Affordable Care Act penalizes them for doing so. The reason is often simple. Consumers forced to choose between an expensive penalty and an even more expensive health-insurance plan will often choose the cheaper option. It may be a financial necessity. The number of people making this choice will rise as insurance becomes ever more expensive.
This will undermine the Affordable Care Act’s central goal of universal coverage. I estimate the total number of uninsured in 2025 will be roughly 40 million — roughly as many uninsured Americans as there were before the law was passed.
Such is the ACA’s likely future as it nears its anniversary. This puts in context the claims of the presidential candidates like Hillary Clinton, who earlier this month said that the Affordable Care Act is “working.” That may make for a good campaign sound bite, but it doesn’t match the experiences of many Minnesotans dealing with the law firsthand. They’re paying more and getting less with every passing year — a trend that shows no sign of changing anytime soon.
Stephen T. Parente is a professor of health finance, associate dean of the Carlson School of Management and director of the Medical Industry Leadership Institute at the University of Minnesota.