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Obamacare still offers affordable plans, even with big price hikes, officials say

People sit with insurance agents as they discuss plans available under the Affordable Care Act.
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People sit with insurance agents as they discuss plans available under the Affordable Care Act.

Pay no attention to those double-digit Obamacare price hikes behind the curtain.

The Obama administration on Wednesday highlighted the affordability of Obamacare insurance plans for many customers, pushing back against waves of news about steep proposed increases in premiums for individual health insurance plans next year.

In a hypothetical scenario where rates for all such plans increased by 25 percent, "the vast majority of consumers" on the federal Obamacare marketplace HealthCare.gov would be able to purchase coverage for less than $75 per month, said the U.S. Health and Human Services Department, citing a new department analysis.

The analysis found that 73 percent of all HealthCare.gov customers would be able to find a plan for that price.

And it also found that "78 percent of consumers could find coverage for $100 or less" on HealthCare.gov, the largest Obamacare marketplace, which serves residents of 38 states.

The analysis reflects the fact that some 85 percent of Obamacare customers who buy plans on government-run marketplaces receive federal subsidies, or tax credits, that reduce the amount they end up actually paying for their monthly premiums. That brings their payout below the retail prices. And the tax credits, which are available to people with low or moderate household incomes, go up in value as premium prices increase year over year.

That point is illustrated in the analysis, which found that if all premiums increased by 50 percent, even more HealthCare.gov customers would be able to find coverage for $75 or less, and $100 or less, than would be the case if the rate hikes were 25 percent. The report noted that even a 25-percent across the board hike is "highly unrealistic."

"Headline rate increases do not reflect what consumers actually pay," said Kathryn Martin, acting assistant secretary for planning and evaluation at the HHS, whose division conducted the analysis.

Last year, the report noted, the average premium for HealthCare.gov customers with a subsidy increased just $4 per month.

However, HHS' analysis leaves unspoken what will happen next year to Obamacare customers who are not eligible for subsidies, either because their incomes are too high or because they buy plans outside of HealthCare.gov or on exchanges operated by individual states.

About 11 million people are covered by individual health plans sold through government-run exchanges. Millions of more people buy plans outside of those marketplaces.

"Subsidy-eligible people are protected from rate increases, and nonsubsidy eligible people feel the brunt of those rate increases," said Caroline Pearson, senior vice president for policy and strategy at the Avalere Health consultancy.

"Certainly, non–subsidy eligible people are going to feel the full effect ... they're going to see higher rates in many cases this [next] year than they did in previous years," she said.

Many plans sold either on or outside the exchanges are proposing significantly higher increases for 2017 premiums than they have in recent years.

Blue Cross Blue Shield of Texas, which is HealthCare.gov's second-biggest biggest state in terms of customers, is asking for rate hikes of up to 60 percent for next year.

In Illinois, major insurer Blue Cross Blue Shield is asking for rate hikes between 23 and 45 percent higher next year.

In New York, insurers are asking for average rate hikes of 16.6 percent.

However, Pearson said, that while "in certain regions they [premium hikes] will be really high ... the national average will be somewhat modest."

"They'll sit somewhere around 10 percent," Pearson said.

She noted that those kinds of premium increases are "fairly comparable to" the kinds of price hikes that were seen in the individual insurance market before the passage of the Affordable Care into law, "where rate increases were often around 10 percent."

HHS on Wednesday reiterated the fact that consumers have more ability under the ACA to "shop around to find the best plan," and one that fits their budget.

"Last year, more than 40 percent of returning HealthCare.gov consumers switched plans," which "saved an average of $42 per month, or about $500 annually," HHS noted.

HHS also pointed out that researchers have found that Obamacare rates in 2016 were between 12 and 20 percent below the levels initially projected by the Congressional Budget Office.