Trump: Astronomical Premium Increases On Deck for Obamacare

By Markets

Premiums for health insurance plans sold in the Obamacare marketplaces are heading higher in 2017, but are Obamacare premium increases as steep as presidential candidate Donald Trump says? During last Sunday's presidential debate, Trump asserted that premiums are climbing by more than 50%.

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In this clip from The Motley Fool's Industry Focus: Healthcare podcast, analyst Kristine Harjes is joined by contributor Todd Campbell to discuss how much Obamacare premiums are actually climbing next year.

A full transcript follows the video.

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This podcast was recorded on Oct. 12, 2016.

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Todd Campbell: One of the first statements that was madein the debate was Trump'sassertion that premiums are rising byfairly dramatic numbers,68%, 59%,71%. Those are big increases.

Doing a little bit of fact-checking on this,there are some communities and specific plans within some communities wherepremiums are increasing by levels that are high,in the double digits. But those are very rare.Kaiser Family Foundation went through and did an analysis in Julyand they found that the average planis going up by about 9%. Of course,that's far southof the numbers that Trump wasmentioning. But there are some areaswhere premiums are increasing for specificplans. For example, in Nashville, Tennessee,increases are about 25%in 2017, versus 2016. So, while he is saying there's a really large increase,it's not really across the whole nation. It's for specific communities that are seeing large increases. So, that's where we come down on that.

Kristine Harjes:So,this is really a question of scalewhen it comes down to it. When you're talking aboutone specific circumstance, it is far more likely that you can getsome sort of astronomical number, as opposed to when you look at the averagein an area, and even more so when you lookat the average nationwide.

Campbell:Yeah,and there's another observation herewe have to remember. Although premiums are increasing, we also have to remember that the absolute out-of-pocket cost --if you're at home and you have an Obamacare plan, don't start panicking. If you receive subsidies, the subsidies are adjusted. Most people who get Obamacarereceive subsidies.

Harjes:Right, 82%.

Campbell:Yeah, 82%. Andmost people who get subsidies pay less than $100 a month for their insurance, whichI think most people will agree is a pretty low priceto pay for their healthcare insurance.

Harjes:Andthe subsidies get adjusted for these price increases, too.

Campbell:Andthe subsidies get adjusted upwardbased upon the cost of the plans. So, premiums are heading higher,but those higher premiums, the brunt is really borne by those people who --like myself -- participate in the Obamacareexchanges but don't qualify for the subsidies.

Harjes:There'salso another dilemmagoing on here. It's something that we've talked about on the show before. There'sthis issue between health insurers being sounprofitable on these exchanges that they're dropping out,possibly leading to lower competition, whichyou could imply would mean even higher prices, versus the other side of that coin --the insurerscould hike pricesto make themselves profitable.

Campbell:Right, Kristine. Atthe heart of the matter, what Trump is really saying is thatpremiums are rising rapidly, and that's a big problem. There'sevidence, and we've talked about it on the show previously, that insurers have notadequately priced their plans to turn a profit.United Healthcare(NYSE: UNH), as you were alluding to, hasalready said that they're going to go fromproviding health insurance in a couple dozen states to just a handful of statesin 2017,because they're losing hundreds of millions of dollarson the plans that they offered this year.

Harjes:So,when we look at this statement as a wholemade byTrump,it's true that numbers are going up. Whether or notthere are individual cases of 68%, 59%, 71%, that's entirely possible. I would say the statement, as a whole, istrue but needs context. Is that fair?

Campbell:I think that's pretty fair.

Kristine Harjes has no position in any stocks mentioned. Todd Campbell has no position in any stocks mentioned. The Motley Fool recommends UnitedHealth Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.