Obamacare Oversight: The Looming Premium Rate Shock

On March 14, 2013, members of the Energy and Commerce Committee sent letters to 17 of the nation's largest health insurance companies requesting analyses of the effect of the Patient Protection and Affordable Care Act's (PPACA's) policies, mandates, taxes, and fees on health insurance premiums.

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Excerpts | Scope and Methodology | Exhibits | Inquiry to Insurance Companies

Excerpts from the report

Affordability. It was a central premise – and promise – of the Patient Protection and Affordable Care Act (PPACA) when the law was debated in Congress throughout 2009 and signed into law on March 23, 2010. In his remarks that day, President Barack Obama stated: “This legislation will also lower costs for families and businesses…”  Over three years later, the White House continues to state that the PPACA will lower costs.

As part of its authority and obligation to conduct oversight of the programs, spending, and matters within its jurisdiction, the Committee on Energy and Commerce is conducting a multi-faceted investigation of PPACA and its consequences. The following report chronicles the massive premium increases awaiting Americans when full implementation of the PPACA occurs in eight months, definitively contradicting the promise that the law will lower costs. As this report demonstrates, consumers purchasing health insurance on the individual market may face premium increases of nearly 100 percent on average, with potential highs eclipsing 400 percent. Meanwhile, small businesses can expect average premium increases in the small group market of up to 50 percent, with potential highs over 100 percent.


The Individual Market

The materials provided to the committee indicate that consumers who purchase insurance in the individual market after full implementation of the PPACA will be hit with substantial premium increases. One insurer noted that 45 states and the District of Columbia “will see significant premium increases.


The Small Group Market

According to materials submitted by one insurer, small businesses in “nearly all states will see premium increases.”  While these increases will not likely be as high as those in the individual market, the incentives provided in the law to assist small businesses by reducing costs may be inadequate. For example, one insurer that offers small group plans observed that “[t]he ACA’s small group health tax credit incentive program is temporary and very small.”  To make matters worse, due to the administration’s inability to “meet tight deadlines,” the PPACA program “intended to provide affordable health insurance to small businesses and their employees” has been delayed.


The Large Group Market

Although many large employers self-insure, some purchase coverage from health plans through the large group market, which includes plans covering more than 50 lives. Most of the insurers contacted by the committee had not conducted an analysis on the PPACA’s effects on the large group market. One insurer that did, however, estimated a premium increase for the large group market at 20 percent to 25 percent.  Another insurer provided the following chart showing estimated premium increases in the large group market ranging from 15 percent to 20 percent.



Scope and Methodology

Because of the proprietary and confidential nature of the material submitted by these companies, committee staff has redacted identifying information from this report and the accompanying supporting documentation.  Publicly identifying the authors of these materials could disrupt the process by which insurers are required to file their proposed premium rates, especially considering that some of the information could change.[1]  The committee requested the insurance companies produce their most recent existing analyses rather than create new materials when responding to the committee’s requests.  The committee did so in order to capture the most realistic portrait of the PPACA’s effect on premiums.  Because the committee requested that insurers submit original analyses, the statistical information is not of a uniform nature.[2]

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[1] Several insurers made the point that they are doing their best to guess what the market will look like on January 1, 2014.  This is difficult considering (as one insurer remarked) that they have to complete these analyses while the administration has yet to issue many “relevant final ACA regulations.”

[2] Some insurers calculated premium increases by age and sex, others calculated an average for each state they serve, while others tried to estimate the premium increases for a representative plan in the market.



Exhibit A Exhibit I
Exhibit B Exhibit J
Exhibit C Exhibit K
Exhibit D Exhibit L
Exhibit E Exhibit M
Exhibit F Exhibit N
Exhibit G Exhibit O
Exhibit H Exhibit P


Inquiry to Insurance Companies

"Pursuant to Rules X and XI of the United States House of Representatives, the Committee is examining the effects of the Patient Protection and Affordable Care Act (PPACA) on the health insurance premiums paid by American families.

"Last week, the Committee released a report that examined more than 30 studies and analyses of trends in the price of health care premiums. The report shows that since 2008, the average family premium has grown by over $3,000; it also reveals that in the future most people under the age of 50 will see their rates increase significantly.

"These premium increases have occurred before the law's most costly requirements go into effect in 2014. As one of America's largest providers of health insurance, you are uniquely situated to provide information on the premiums American families can expect to pay beginning next year. ... "

Click here to see the list of insurance companies who received the letter from the committee and to read the full text of the letter.