Insurers are no longer treading lightly with premium increases.

Saying that they are paying out more in medical costs than they are receiving in premiums from their members, insurers are dramatically hiking rates for the plans they offer through the federal and state Affordable Care Act marketplaces.

Some of the biggest proposed increases were recently highlighted in The New York Times:

Blue Cross Blue Shield of Tennessee: 63 percent.

Blue Cross Blue Shield of Texas: 60 percent.

Blue Cross Blue Shield of Oklahoma: 49 percent.

Humana in Michigan: 39 percent.

Humana in Missouri: 34 percent.

For now, those are merely requests that have to be approved by government regulators. In 46 states, that task is left to the state insurance commissioner, but in Oklahoma, Texas, Wyoming and Missouri, the Obama administration has determined that there is not sufficient state oversight of rate hikes, and so it will be federal regulators who will have the final say on premiums.

The Obama administration is ramping up its efforts to keep the rate hikes as low as possible. In the spring it announced it would dole out millions of dollars to state insurance commissioners to help them add staff for the purpose of scrutinizing the premium increases requested by insurers.

For the administration, major rate hikes present two distinct problems. First, they threaten to undermine or weaken the ACA structurally, by prompting unhappy customers to ditch their plans. Second, they pose a political threat to Democrats in general and Hillary Clinton in particular, since the presumptive Democratic nominee has fully embraced the ACA in her campaign against Donald Trump, who has predictably seized on news of rate hikes to denounce Obamacare as a failure.

The Obama administration is eager to point out, however, that even dramatic rate hikes won’t necessarily hit the most vulnerable customers hard. The great majority of Obamacare policyholders receive premium tax credits and a large portion receive additional subsidies that limit their out-of-pocket expenses. For the latter group, monthly costs only rose $4 last year, despite much greater overall premium increases.

One problem that will handicap the administration’s attempts to keep premiums down is the elimination of funding for “risk corridors,” which were intended to help insurers absorb losses in the first years of the ACA. Sen. Marco Rubio championed the elimination of the program in an end of year budget compromise, saying it amounted to a “bailout” of bad business decisions.

Finally, as long as the cost of prescription drugs continues to rise, it is hard to imagine health insurance premiums will not as well. A report in The Wall Street Journal found that many major pharmaceutical companies are attributing greater sales of their drugs to increased prices.

As premiums increase and drug costs increase, policymakers are faced with competing arguments over how to reduce the overall cost of care to consumers. Insurers seeking to merge — Aetna and Humana; Anthem and Cigna — argue that their mergers will help them negotiate better prices with drug companies and providers, a claim that consumer advocates find unconvincing but some regulators may find appealing.

Instant Insights /

Can the Obama administration prevent big premium increases?

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