(Bloomberg) — Many people shopping for health coverage this weekend on the Patient Protection and Affordable Care Act (PPACA) exchange system are going to see double-digit percentage increases in their premiums. That's still not enough for some insurers.
Anthem (NYSE:ANTM) says there remain competitors in the government-run marketplace offering premiums that aren't enough to profitably provide the coverage patients will require. Prices in some areas probably will have to climb in 2017 and even 2018 to reach levels that make sense, according to Chief Financial Officer Wayne Deveydt. Meantime, Anthem will sacrifice market share to keep its plans profitable, he said.
"When you have fewer national enrollees and you have price points that we don't believe are sustainable, we've just made a conscious decision we're not going to chase it," Deveydt told analysts on a conference call on Wednesday. "We are going to need to be patient until this works itself out."
Deveydt's remarks spotlight a problem for the PPACA marketplaces as the third annual sign-up period begins Sunday. Set prices too low to lure customers, and losses can mount. Some smaller firms already have closed, and some bigger insurers have withdrawn from markets — such as Aetna (NYSE:AET), which will offer exchange coverage in two fewer states.
The conundrum has led to this year's price increases, which have been higher, on average, than last year's hikes. But the danger is that premiums are now too expensive for some families to afford coverage, especially the uninsured people the Obama administration is trying to persuade to shop on the exchanges for the first time.
"Exchanges have had their challenges," said Ana Gupte, an analyst at Leerink Partners who follows health-care companies. "The growth has been reasonable, depending on where you priced, but the margins have been a little less compelling."
Insurers have benefited in many ways since PPACA was signed into law in 2010. About 17.6 million people have gained insurance coverage, mainly through the health-insurance marketplaces and an expansion of Medicaid, the U.S.'s program with states to cover low-income people. The insurance companies administer coverage for much of that population, and their stocks have soared in the past few years on the growth in their rolls.
But the remaining uninsured are poorer and younger than those who've already signed up, and they're more difficult to reach, Health and Human Services (HHS) Secretary Sylvia Mathews Burwell has said. That may mean slower growth for the insurers.
Faster than inflation
PPACA exchange plan prices are going up faster than inflation or wages. By one measure, premiums for mid-level plans are climbing at least 7.5 percent in 37 states where consumers use the U.S.-run HealthCare.gov website to buy coverage.
Charles Gaba, who tracks the health law on ACASignups.net, estimates that the rate increases across the U.S. will average about 12 percent to 13 percent, based on a weighted average of current enrollment. That means there are lots of consumers who are seeing higher rates and could benefit from re-examining their options as the sign-up period starts.
"Some of the large carriers are having pretty significant rate increases," said Jeff Smedsrud, who runs the private insurance shopping site HealthCare.com. "Consumers should not automatically auto-renew. They should take the five to 10 minutes that it takes to compare" plans.
PPACA subsidies
