Question: Will the Exchange raise health insurance rates?

Answer: Yes. In the first few years of the Exchange’s life, health insurance premiums will be higher because, the Affordable Care Act (ACA) does nothing to immediately reduce medical costs on which insurance premiums are based and the ACA has several requirements that will tend to raise premiums over the short -term, namely:

• The requirement that all insurance plans cover “essential benefits”,
• The requirement that all plans meet a “minimum actuarial value” of 60 percent ,
• The requirement that insurers spend 80 percent of individual-market premium costs on health expenses (medical loss ratio), and
• Requirements that insurers align rates more closely between the young and the old (community rating).

The competitive efficiencies and economies of scale brought about by the Exchange should help to reduce the rates in the longer term.