On the whole, the Affordable Care Act is working pretty well, getting more people insured and increasing the quality of insurance overall. But on Thursday, the Wall Street Journal reported an alarming development: Health insurers on many state exchanges are looking to boost their premiums a ridiculous amount in 2016. New Mexico’s leading provider, for instance, is seeking a 51.6 percent hike, while Maryland’s is seeking a 30.4 percent hike. (Insurers in other states, like Vermont and Indiana, are asking for minimal increases.)
Libertarian and conservative outlets are, predictably, citing the rate hike as yet another Obamacare catastrophe. But it’s actually a fairly foreseeable—and possibly temporary—problem. The ACA forced a bunch of uninsured people to get insurance. A hefty amount of these newly insured people were sick when they joined their new plan. Suddenly able to afford treatment, these sick people drained insurers’ funds. But as they regain their health and remain on their plan, they’ll stop draining their insurers’ resources and start boosting them instead.
There’s another huge footnote to the initially eye-popping premium boosts. These are all proposed hikes: In many states, insurance regulators can force insurers to justify their rate increases, and some can reject any increase they find to be unjustified. The federal government, too, can require insurers to explain any premium increase beyond 10 percent—though it lacks the power to reject a rate hike. Thus, some insurers may have initially overestimated their premium increases so they can comfortably negotiate downward.
All of these estimates, by the way, rely on the assumption that the Supreme Court won’t gut Obamacare in June by revoking federal subsidies for people in states that didn’t set up their own exchanges. Should the court go down that rabbit hole, the havoc wrought on the American health care system would be catastrophic and, most likely, irreversable.