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HHS Report Shows Lower Premium Increase Than Expected

By Erin Mershon, CQ Roll Call

April 12, 2016 -- The Obama administration is hoping to stave off a repeat of last year's furor over rising insurance premiums on the public exchanges with a new report that highlights a 4 percent average premium increase for people getting tax credits under the Affordable Care Act.

That's a much lower rate than some of the double-digit premium hikes insurers initially proposed, when some were asking for rate hikes as high as 35 to 40 percent. Those requests sparked negative headlines and became a frequent punching bag for Republicans opposed to the health. House Speaker Paul D. Ryan, R-Wis., railed against "double digit premium increases," and Republican presidential frontrunner Donald Trump blasted the spike in costs.

The 4 percent average increase the administration highlighted only accounts for those consumers receiving tax credits, about 85 percent of consumers. A broader analysis of premium increases, leaving out the credits, showed an average premium increase of 8 percent.

This year, Richard Frank, director of the Office of the Assistant Secretary for Planning and Evaluation at the U.S. Department of Health and Human Services (HHS), is hoping to undercut Republicans' criticisms early.

"Marketplace consumers would do well to put little stock in those initial numbers," he wrote in a blog post Tuesday touting the administration's calculations.

In its new report, HHS emphasizes that those initial proposed rates don't predict what consumers will actually pay, because they don't take into account state insurance commissions' rate reviews, the ability consumers have to shop for cheaper coverage, or the tax credits consumers often receive under the health law, which increase if the cost of a benchmark plan increases.

"We've seen a lot of switching around of insurers offering the lowest cost option, and for that reason, people on the exchange who are shopping are also demonstrating that they're willing to switch to lower cost companies," said Cynthia Cox, an associate director at the nonpartisan Kaiser Family Foundation. "It seems that enrollees are particularly price sensitive when it comes to the premium, more so than what we've seen when it comes to other markets."

The report also underscored that more than 2.3 million people—43 percent of returning customers—chose a new plan for 2016, which the administration said greatly reduced the average premium increase and cut premiums by an average of $42 per month.

HHS also estimated that state regulator reviews saved consumers $1.5 billion last year.

A health insurance industry official suggested that plans are facing uncertainty in the new marketplaces that can affect premiums.

"Premiums reflect the rising cost of medical care driven by higher prescription drug prices and hospital costs," said Clare Krusing, a spokeswoman for America's Health Insurance Plans. "On top of that, this is a market that is still in the midst of a major transition. Between changes to the premium stabilization programs and uncertainty around special enrollment periods, there needs to be much greater focus on promoting a stable, affordable market for consumers."

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