END OF 2018 OPEN ENROLLMENT PERIOD (41 states)

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An important point to remember when calculating "average" rate hikes over time...

Thanks to commenter "M E" for bringing this up.

For years now, various healthcare writers, myself included, have noted that prior to the ACA exchange policies being implemented in January 2014, individual market insurance policy rates were typically increasing by an average of around 10-12% per year. This was based on several different sources, including studies like these:

Anyway, the "10-12% per year" figure has been pretty widely used as a basis for comparing the post-ACA annual average hikes. Here's what it looks like using data from the final link for the past 8 years:

  • 2008: 9.9 - 11.7% (10.8% midrange)
  • 2009: 9.9 - 11.7%(10.8% midrange)
  • 2010: 9.9 - 11.7%(10.8% midrange)
  • 2011: 7.0%
  • 2012: 7.1%
  • 2013: 10.3%
  • 2014: 2.4% (special case; first year that all new policies had to be fully ACA-compliant; as a result, there was a sort of "rebooting" of the indy market)
  • 2015: 5.6% (effective increase after people shopped around)
  • 2016: 8.0%

It's important to remember, however, that these rate hikes are compounded annually. In other words, you can't simply add up the averages, say "premiums have increased 73% over the past 8 years". You have to compound the hikes. Let's say the average premium started out at exactly $100 in 2007:

  • 2008: $100 + 10.8% = $110.80
  • 2009: + 10.8% = $122.80
  • 2010: + 10.8% = $136.00
  • 2011: + 7.0% = $145.50
  • 2012: + 7.1% = $155.90
  • 2013: + 10.3% = $171.90
  • 2014: + 2.4% = $176.10
  • 2015: + 5.6% = $185.90
  • 2016: + 8.0% = $200.80

...which adds up to almost exactly a 100% average rate increase over 8 years, not 73%.

Anyway, I'm not trying to make any larger point here; the HHS data seems to be pretty consistent with the other reports for overall national average increases. I just wanted to make sure people remember the importance of compounding the changes when trying to run an average over time.

UPDATE 7/6/16: See the comment by "M E" below for further detail on this point.