The nearly 400,000 people who buy their own health insurance in Michigan will see premiums rise by an average of 16.7% next year, a sticker shock that insurers and the government say can be offset for those who qualify for tax credits.
Open enrollment for 2017 begins Nov. 1. It's the fourth year that individuals will be able to purchase private insurance through a government-regulated market, or exchange, under the federal health care law.
The price spikes are being blamed on insurers' higher costs, primarily people submitting more claims than expected and the pending end of a federal re-insurance program that has protected insurers from substantial losses from high-cost enrollees.
"A number of these individuals, these members are taking full advantage of the health insurance they now have. They likely were previously uninsured, so we're seeing a significant number of people who are using far more services than we anticipated," said Rick Notter, director of individual business marketing and distribution for Blue Cross Blue Shield of Michigan.
Blue Cross and its HMO subsidiary, Blue Care Network, have about 200,000 enrollees in plans that are offered either on or off the exchange — half of the state's individual market. Blue Cross rates will increase 18.7% on average, BCN's 14.8%.
Priority Health, which has 113,000 participants, will raise rates 13.9% on average.
Ten companies — four fewer than this year — will sell 167 different plans on the exchange, roughly 75 of which will be priced at least 10% higher.
Notter identified three reasons for spiking costs, too — people not keeping their plan the whole year, specialty drug prices and younger, healthier adults deciding not to buy insurance and to instead pay a fee when they file their federal tax return.
The fine for the 2016 tax year is $695 or 2.5% of household income, whichever is higher. The maximum penalty is $2,085.
"When they look at doing the math, they see the penalty is much less than what the premiums would be for the entire year," Notter said. "When they don't come into the market, you're not able to spread that risk across all the people that would be involved in the pool of members."
HHS spokesman Jonathan Gold downplayed the rate hikes, saying most people on the government market — at least 70% — will be able to buy a plan for less than $75 a month.
"Headline rate changes do not reflect what these consumers actually pay because tax credits reduce the cost of coverage below the sticker price and shopping helps consumers find the best deal," he said.
The tax subsidies will rise in conjunction with the price of a benchmark policy known as the second-lowest-cost silver plan. Gold said that last year, despite headlines projecting double-digit premium increases, healthcare.gov consumers qualifying for tax credits paid $4 more per month on average. In 2015, he said, more than a third of return Michigan customers switched plans, saving $45 monthly.
The companies' average rate hike are composites — some customers renewing their coverage will see bigger premium increases and others lower ones depending on where they live, if they smoke and other factors. They also may choose to move to a different plan.
Of the 393,000 Michigan residents enrolled in the individual market — millions of others are covered by employers or government programs such as Medicare and Medicaid — 313,000 obtain it on the federal exchange. The Obama administration recently released an analysis suggesting that 62,000 residents who purchase plans outside the exchange may qualify for tax subsidies but are unaware of the financial assistance.
Consumers can be eligible on a sliding scale if their incomes are between 100% and 400% of the federal poverty line, about $100,000 for a family of four.
Federal officials say they will do a better job this enrollment period of letting people know about the credits. Plans include more targeted advertising, strengthened relationships with agents and brokers, shorter and simpler notices to consumers and easing the transition of coverage when someone turns 26 and is no longer eligible for a parent's plan. Enrollment will end Jan. 31.
"They're going to market heavily to the millennials, which will be helpful," Notter said.