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Obamacare's crushing cost to some families: 49-percent price hike since 2014, premiums of $14,300

CNBC logo CNBC 5/11/2017 Dan Mangan
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When Maggie Rikard first started buying Obamacare health plans in 2014, the Washington State housewife was paying a premium of about $375 per month for a plan that had a $2,500 deductible.

Three years later, Rikard's premiums have spiked to $471 per month — a 25 percent increase — and her deductible is now up to $5,000.

But that's still lower than what Rikard would have been charged if she had stayed in her prior plan, which her former insurer said would cost $600 per month in 2017.

"I literally picked the cheapest plan there was" on eHealth's (EHTH) insurance brokerage platform, said Rickard.

The plan's provider network does not include doctors she prefers. But she said that if she needs to she would go to her preferred doctor, and personally pay the extra cost, since the high deductible of her plan would require her to do so anyway for covered doctors.

"I think it's awful," the 60-year-old Rikard said of the price hikes she has experienced in recent years.

She's echoed by Karen Poulter, a 51-year-old molecular biologist from California, who this year saw her health insurance premium jump 20 percent.

She now pays almost $618 per month for a plan that has a $4,000 deductible and — because of health problems that include migraines and endometriosis — her prescription drug costs out of pocket are about $400 each month.

"That's the major cost I have to pay each year," Poulter said of her insurance premiums and out-of-pocket health charges. "That's where much of my cash goes."

Without aid, customers feel the pinch of price hikes

Rikard and Poulter aren't alone in feeling the pinch from insurance in the Obamacare era.

The two women and millions of other Obamacare customers who do not qualify for financial aid to lower the cost of their health insurance — or who opt not to apply for such assistance — pay the full cost of coverage for their plans.

While the Republican Obamacare replacement bill pending in Congress would increase the number of people who would qualify for subsidies, the bill is also expected to increase average premiums over the next two years higher than they would be under Obamacare.

New data shows how just how high the cost has already gotten for people who don't qualify for subsidies now.

In a report, the online insurance brokerage eHealth found that individual premiums for insurance plans sold through its marketplace, or exchange, rose to an average of $378 per month in 2017 — an 18 percent increase from 2016's open enrollment season.

Since 2014, the average premiums for individual coverage have jumped 39 percent, eHealth found in the analysis of plans sold through the company.

That year, 2014, was the first for new Affordable Care Act rules mandating designs of insurance plans, which included a set of minimum health benefits that plans had to include, as well as a guarantee that sicker customers could not be charged more than healthier people.

The average deductibles for individual plans on eHealth now are nearly $4,500, the company said. A deductible represents how much a customer must pay out of pocket for health services not completely covered by their plan.

Protest outside the offices of Rep. Carlos Curbelo (R-FL) asking the congressman to protect the Affordable Care Act from being repealed in Miami.© Provided by CNBC Protest outside the offices of Rep. Carlos Curbelo (R-FL) asking the congressman to protect the Affordable Care Act from being repealed in Miami.

Premiums for plans covering families increased even higher in 2017 — 20 percent higher than the prior year. The average for families selecting plans was $997 per month this year, which is 49 percent higher than in 2014, eHealth said.

The average deductible for a family plan sold on eHealth is now $8,322.

In 2017, the average premium for a plan covering a family of four is more than $14,300 annually — or $1,195 per month, the company said.

Scott Flanders, CEO of eHealth, said, "Anyone who still needs proof that health insurance costs are out of control should take a look at our 2017 Price Index Report."

"Middle-income Americans who purchase coverage on their own and do not qualify for subsidies under current law are straining under the burden of costs like these," Flanders said.

Flanders told CNBC that eHealth regularly does outreach to customers to gauge their experience buying coverage. And he routinely hears complaints about rising costs.

"It's hard to not be entirely sympathetic with them, because they're paying for coverage that they can't possibly use" in many cases, Flanders said, referring to the high deductibles often seen in the plans. "And they're not being subsided, yet they are subsidizing others, and they're being priced out of the marketplace."

"Many of them are retirees living on fixed incomes," he said. "They've just been flabbergated by these massive increases in premiums."

Obamacare, beginning in 2014, required nearly all Americans to have some form of health insurance coverage or pay a tax penalty. To facilitate compliance with that rule, the Affordable Care Act offered funding for states to expand their Medicaid programs to cover more poor adults than they had been covering.

The ACA also authorized the creation of government health exchanges, such as the federally run HealthCare.gov, and state-run marketplaces, to sell private plans to individuals and families who did not have insurance through a job, Medicare, Medicaid or other sources.

To help people who purchased plans on the exchanges, the ACA also offered federal tax credits, or subsidies, to lower the monthly premiums of those plans. But those subsidies are only available to people whose household income is between 100 percent and 400 percent of the federal poverty level, or $20,420 to $81,680 annually for a family of three.

Out of the 12.2 million people who selected an Obamacare plan during open enrollment for 2017 on one of the government exchanges, 10.1 million, or 83 percent, qualified for an advanced premium tax credit that lowered their monthly premium.

Those premiums, on average, had a dramatic effect at reducing premiums.

Federal data shows that while the average premium for a so-called silver plan sold on HealthCare.gov grew from $302 per month last year to $385 per month this year — a 27.5 percent increase — the average premium actually paid by a subsidized customer remained the same from year-to-year: $101 per month.

And while the average price of all HealthCare.gov plans spiked by 32 percent, from $290 per month to $383, the average actual premium paid by subsidized customers did not change. It was still $106 per month. The lack of change in actual money paid by customers reflects the fact that Obamacare subsidizes adjust upwards as premium prices rise.

But unsubsidized customers are bearing the full brunt of price hikes. More than 2 million people who did not qualify for subsidies made plan selections on government exchanges this year. And millions more bought plans outside of the exchanges. Only customers of plans sold on the exchanges can get subsidies.

Double-digit price hikes ahead for 2018

And already this year, there are signs that prices for unsubsidized customers could get even steeper.

In Maryland, the insurer CareFirst has requested premium price increases in 2018 ranging 45.2 percent to 57.10 percent. In the District of Columbia, CareFirst has asked for a 39.6 percent rate increase for Obamacare plans.

In Connecticut, Anthem (ANTM) is asking for a 33.8 percent increase in plans sold on and off of the state-run health exchange. And ConnetiCare is asking for price hikes of more than 20 percent for plans sold outside of the exchange, and premiums that are 15 percent higher for plans sold on the exchange.

The Republican Obamacare replacement bill, known as the American Health Care Act, would allow subsidies to be used to purchase plans both on the government exchanges, and outside of them. That would include plans sold on eHealth and other web brokers including GoHealth and GetInsured, as well as conventional brokers and through insurance companies directly.

The AHCA would also increase income limits for subsidy eligibility, but phase out the value of the subsides for incomes between $75,000 and $115,000.

And instead of having the subsidy value be tied to income levels and price of coverage, the AHCA would offer flat amounts as subsidies, ranging from $2,000 per year for people age 29 and younger to $4,000 for people age 60 and older.

Under the GOP bill, some people would get more financial assistance than they do now, but others would get less. Analysts have found that older, lower-income people in rural areas could pay far more for their insurance under the Republican plan than they do now under Obamacare.

The AHCA also would allow insurers to charge older customers up to five times the amount they charge younger customers. Obamacare currently sets that ratio at 3-to-1.

Flanders, the CEO of eHealth, said the adjusted ratio under the Republican plan better reflects how much older customers cost insurers than does the Obamacare ratio.

Flanders also said "we're enthusiastic for AHCA for young people."

"Because it's certain to increase the number of younger enrollees, which is just critical to the stability of the system." Flanders said.

AHCA, if passed into law, is expected to lower premium costs for younger customers, whose participation in insurance pools is crucial to offsetting the cost of older customers.

"Where I think ACHA falls short is funding for older Americans," Flanders said. "In my view, in eHealth's view, the system would be more fair if there were more funding for people over 50."

The Republican bill is currently pending in the Senate, where it potentially could be amended to change the subsidy formula.

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