Rate increases on insurance plans in the individual and small-group markets has less to do with the Patient Protection and Affordable Care Act and more to do with trends in medical costs, according to an issue brief published by the Commonwealth Fund.
Under the PPACA, insurers are required to justify rate increases that are 10 percent or more for nongrandfathered health plans in the individual and small-group markets, yet the average rate increase reported by insurers for renewals taking effect from mid-2013 through mid-2014 on products covering at least 150 people was 13 percent.
Analyzing the filings, the issue brief authors found medical costs — including both increased use of medical services and higher unit prices — to be the most significant driver of rate increases.
Rising administrative overhead and profits played a role, albeit smaller than medical costs, in driving rate increases as well.
Insurers did not attribute any substantial portion of these medical cost trends to factors related to the PPACA. The only PPACA-related factor that insurers mentioned frequently was new taxes and fees that began in 2014 and even those only accounted for about 4.5 percent of their renewal rates, or about a third of their overall rate increases.
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