“It’s now time to pay the piper!” Any idea where this phrase comes from? It actually originated back in the days when traveling musicians would travel the countryside and provide music for the elite. A musician would play (usually a pipe or flute because they were easy to carry) and provide the music to dance to. At the end of the evening, it would be time to pay the piper for providing the festivities. Today, we use the term to explain that although we enjoyed something for a time, at some point, we have to pay up.
So how is this affecting insurance? Well, let’s start back on March 23, 2010 when our President signed into law the Affordable Care Act. This was promoted as a cure all with healthcare costs. It was even sold on the basis that it would save the average family $2,500 a year in costs. I am not going to say that there was false advertising but let’s face it; there was no reduction in the costs that the average family paid. We added significant benefits, increased the number of insured, and put in place a disastrous system of enrollment but still maintained we would be saving money. Our government assured that premiums would not increase by more than 10% and they made sure that was the case. For the next two to three years, any rate increase by a carrier had to first be approved by their state and then had to be submitted to CMS and they also had to approve the increases or the carrier was not allowed to be on the exchange. Well, carriers figured that they needed to be on the exchanges so they “artificially” kept their rate increases to near or at single digits. Most carriers had reserves to allow them this luxury so for a short while it seemed to keep rates reasonable. Well, now it’s time to pay the piper.
This year, we are seeing significant increases on the individual policies sold in most states. Some carriers have even pulled their products as they see no way to increase the premiums enough to cover the claims they are incurring. United Health Care has left most states completely because of the high losses they have seen. The remaining companies have filed for extremely large increases that if not granted, may require them to leave the market also. The rate increases are upwards to 80% and in most cases will be in the mid thirties. Can you imagine if your house payment went up by 50%? Since many health insurance premiums are close to a house payment, that is exactly what will happen. Why do these carriers need the type of increases I am referring to? Well the ACA has allowed people to come on and off policies pretty much at will. I can find so many exceptions to the rules that it has been possible for someone to get hospitalized and then apply for coverage. This system has forced carriers to pay large claims but not receive the premiums they need.
The interesting thing about these large increases will be the fact that many individuals will not notice. Why is that you ask? Well, if I am receiving a subsidy for my coverage, my out of pocket cost doesn’t go up but rather the amount of subsidy I receive is increased. Where does the subsidy come from you ask? We the people, through our taxes will foot the bill. So when the rates for the insurance go up by 30 – 80%, so will our need for tax revenue. So those of you, who don’t receive subsidies will so to speak, get a double whammy. First, you will pay the higher insurance rates but also be responsible to pay the taxes needed to cover those who do get subsidies. Welcome to the idea of socialism.
It has been a fun 6 years watching the government (Piper) entertain us with the promised magic of the ACA but now it is time to “pay up” and I for one question if I really have enjoyed the dance.