NEW YORK (MainStreet) — During the past three years, many Americans have been feeling the financial relief that Obamacare was meant to provide. However, many other Americans, like Terri Corcoran of Falls Church, Va., have been feeling the pain of increased premium rates. What's bad for many consumers, though, spells good news for insurance companies reaping the financial benefits of these payments.
Corcoran says her health insurance premiums doubled under Affordable Care Act (ACA) to almost $600 a month. “I used to get a policy with a high deductible -- so lower premiums -- because I didn't have many medical expenses,” Corcoran says.
“Under [the] ACA, … I could not get a higher deductible unless I was under 26 years old,” says Corcoran, PR chairperson at Well Spouse Association, a volunteer organization that offers peer support to spousal caregivers. That lack of flexibility frustrates her.
“I'm 64 [and] healthy,” Corcoran said.
That scenario is due to the influx of healthy individuals, along with the federal government’s requirements for health insurance companies to reduce overhead costs and direct a larger percentage of premiums to health care. As a result, the insurance industry appears to be doing well under the ACA, despite early fears.
According to a recent report from the Commonwealth Fund, profits in the health insurance industry remain nearly the same as before the ACA was implemented.
Stock prices for the biggest insurance companies also remain healthy and, despite early fears centering on the requirement that insurance companies could no longer deny coverage to sick individuals, few insurers exited the marketplace.
"Among five of the largest health insurers - Aetna, Anthem, Cigna, Humana, and UnitedHealth Group - their stocks are up an average of 107% over the past two years," says Ed Snyder, a financial planner at Oaktree Financial Advisors in Carmel, Ind.
"ACA-compliant plans are required to include certain benefits, and the insurance companies are pricing those benefits into the plans, which means premiums are increasing," Snyder added. "In a lot of cases, the insurance company's claims liability is not increasing, though, and that ends up being profit."
For example, ACA-compliant plans are required to include maternity coverage, Snyder says. Consumers are charged for it, but many people will not use this coverage.
Insurance companies aren’t the only ones with a healthy prognosis. The ACA’s requirement limiting the amount of premium dollars that health insurance companies could spend on administrative costs and pocket for profit saved $5 billion for consumers between 2011 and 2013, according to the Commonwealth Fund.
—Written by S.Z. Berg for MainStreet