I've priced private health insurance at least once a year for the past 10 years. Before the ACA went into effect, I could afford private health insurance. The price, for me, has over doubled since then and the deductible has gone up by 700%. For someone in my situation, the ACA makes health insurance unaffordable. I am going to be crossing my fingers this year and hoping I don't have any major catastrophes. I'll wind up paying the fine at the end of the year.
One aspect of health insurance pricing that seems to go unheeded in many discussions of health care is that as you age, your individual health insurance premiums go up due to older individuals having higher claims than younger individuals. When we use anecdotal evidence of our historic personal health insurance premiums, we are not controlling for this yearly increase. In fact, the Center for Medicaid and Medicare published age factors for pricing health insurance on the 2014 exchanges with the following unisex age factors for individuals between 22 and 32:
22 1
23 1
24 1
25 1.004
26 1.024
27 1.048
28 1.087
29 1.119
30 1.135
31 1.159
32 1.183
So, under the 2014 rating rules, a 26-year-old pays about 2.4% more in premiums than a 22-year-old for the same plan. A 32-year-old pays about 18.3% more in premiums than a 22-year-old for the same plan. So, if 2014 rating rules had been in place when you were 22, then an 18.3% increase in premiums over the past 10 years would be expected simply as a result of you being older and riskier to insure. However, since ACA guidelines have changed quite a lot in the pricing of individual plans for 2014, we need to consider a few other factors to explain the exorbitant premium increases that you have experienced.
I am going to make the assumption that you are male, and I’ll tell you why. The ACA introduced new rating guidelines in which unisex factors must be used to rate individuals. The consequence of this is that females no longer solely bear the very expensive burden of pregnancy costs in their health insurance premiums. Health insurance premiums for young adult males have gone up under the new rules while health insurance premiums for young adult females have gone down under the new rules. Since the 18.3% increase quoted above was based on unisex rating at age 22 instead of male-only rating, your observed increase is expected to be much higher.
Additionally, ACA mandated that premiums for any age group be capped at three times the rate for 21-year-olds. The unisex medical costs curve would generally imply about five times higher rates for a 64-year-old relative to a 21-year-old. Since the mandated ratio is smaller than the implied ratio, rates for 21-year-olds under the CMS guidelines above are artificially increased while rates for 64-year-olds are artificially decreased to meet ACA mandated cap while allowing the insurance company to maintain adequate reserves to meet their claims expenses. Since the 18.3% increase quoted above is based on artificially high premiums at age 22, your actual observed increase will be much larger.
Now to crunch some numbers. The male cost curve which would have been used to rate you ten years ago would have generated about a 37.5% increase in premiums between ages 22 and 32. However, we have switched to the unisex cost curve which, instead, raised your premiums about 125% over those ten years. But that is not the whole story. Inflation has inflated the value money by about 26% over the past ten years. Adding in inflation we get an expected increase of 185% based solely on inflation, you growing older, and the move to unisex rating. Without the unisex rating, we would expect a 74% increase. It is also worth noting that, again due to inflation, your real deductible has only increased about 550%.
You say that these increases have made insurance unaffordable, and that may be true. However, a near doubling of your premium and some of the increase in your deductible was inevitable and had nothing to do with ACA. If you are male, then you can blame ACA for another good chunk of your premium increases. I happen to think that using the wider unisex risk pool is a better policy, but you may not feel the same. Even if you don't, think of how unaffordable the female premium for your same aged cohorts would be without the unisex rating.
There are many other factors that may have influenced your rate increases, some of which are unknowable to us anonymous internet readers and some of which are fairly unknowable to you. Healthcare costs have been increasing faster than inflation nationwide, but some of that increase is as a result of different age demographics, so I did not include any contributing factor since we were already looking at different ages. The provider network in your area may have become more (or less) competitive and thus more expensive. There may be fewer insurance companies offering plans in your area. The demographics of your area may have gotten sicker or older. Some of these possible sources of premium increases could be remedied by moving to a lower risk or lower cost or more competitive area. In short, there are many, many reasons why your premiums increase, but a more than doubling of your, specific premium is not only unsurprising, it’s downright predictable.
Here is the source that I used for the unisex, male, and female cost factors. It is a study from 2013 sponsored by the Society of Actuaries:
http://www.healthcostinstitute.org/files/Age-Curve-Stude_0.pdf Tl;dr. I would have expected a 74% increase in Nic’s premium and a 26% increase in Nic’s deductible between ages 22 and 32 based solely on inflation and Nic growing older. If Nic is male, then another 64% increase in premiums on top of that expected increase can be explained by the move to unisex rating rules under ACA, meaning that a near tripling in premiums is perfectly expected.
