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Rate Increases Would Not Make Obamacare Too Costly, HHS Says

By Erin Mershon, CQ Roll Call

August 24, 2016 -- The Obama administration is pushing back on dire warnings of health insurance premium hikes of more than 20 percent, with a hypothetical analysis showing about three-fourths of customers would pay less than $75 a month even if every plan sold on exchanges were to have a 25 percent boost.

Insurers are proposing rate increases as high as 50 percent in some states, and across the country, the average proposed increase is about 24 percent, according to calculations on the prominent blog Republican critics of the health law have jumped on the proposed hikes as a sign that the exchanges are unsustainable and the coverage is unaffordable.

The analysis released Wednesday by the Department of Health and Human Services' policy wing, the Office of Assistant Secretary for Planning and Evaluation (ASPE), emphasizes the role of tax credits in keeping consumer direct costs down. The law's premium tax credits cover a percentage of premiums, so the subsidies will rise in tandem with premiums. In many cases, consumers facing a particularly steep price increase could also shop around for a different plan. In a hypothetical scenario where every plan saw a 25 percent increase, 73 percent of people would still be able to purchase coverage for less than $900 per year.

Obama administration officials also emphasized in a release that in most states, the proposed rate hikes are still subject to review by regulators and could in fact be lower when they are finalized this fall.

"Headline rate increases do not reflect what consumers actually pay," said Kathryn Martin, the acting assistant secretary for planning and evaluation. "Our study shows that, even in a scenario where all plans saw double digit rate increases, the vast majority of consumers would continue to have affordable options."

Last year, the average premium increase was about 12 percent across all states and plans, according to After premium tax credits and shopping around were taken into account, however, exchange customers saw a premium increase of just 8 percent overall. Those who receive tax credits saw increases of just 4 percent, according to an April report from ASPE.

The Obama administration also emphasized that even with proposed increases, rates on the health law marketplaces are still less than the Congressional Budget Office projected when it first evaluated the 2010 health law.

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