Insurers are beginning to file their rate requests and, naturally, they are beginning to generate headlines as well as more political fodder.
My impression is that the rate hikes (particularly for younger people) are getting way bigger attention than the rate decreases (particularly for older people). That’s partly because runaway costs are a better headline – and fit into a political narrative we’re all hearing.
It’s also because the price increases for younger, healthier people is a serious policy concern. If younger people don’t sign up for the exchanges, and only older sicker people do, the costs will keep rising and fewer people will get covered. That is precisely the opposite of what the Affordable Care Act is supposed to achieve.
But there are several caveats – and I explained several of them in an earlier post. The biggest ones to remember: these are “sticker” prices. Many, if not most, people in the exchange – millions of Americans – will be eligible for subsidies in the form of tax credits. These will be available on a sliding scale to individuals and families up to 400 percent of the federal poverty level.
One other important thing to remember: These are insurers’ requests. This isn’t necessarily what they are actually going to charge, and we won’t know that for a while yet, probably in the summer. Some states have more aggressive rate reviews than others.
There may be some competitive factors at work. Some states have little competition but others will have a choice of health plans and carriers (and some states will have co-ops) and the multi-state plan that may offer lower cost options, or create the intended competition so that by the time the rates are finalized, they may be different than these early numbers we’re seeing.
Jon Gruber, a health care economist at MIT, also thinks that insurers, who don’t know yet who is going to enroll in the exchanges and how well all those risk adjustment mechanisms will work, may have higher prices the first year (2014) and they’ll level out the following year once some they have a greater comfort level.
Two additional resources:
The big study – well, one of the studies – that gave rise to much of the worry about premium spike came earlier this year from the consulting firm Oliver Wyman. It was printed in an actuarial magazine, Contingencies. They concluded that when all the changes in the market and regulatory environment are factored in, people aged 21 to 29 may face premiums that are 42 percent higher (if they are ineligible for any subsidy). One of the co-authors of that study, Oliver Wyman’s Christopher Carlson, also testified to a Congressional panel about premiums several weeks ago.
Here’s another perspective: The Urban Institute, in a study supported by the Robert Wood Johnson Foundation, forecast fairly reasonable costs by 2017, thanks in part to generous subsidies on insurance exchanges. “Two-thirds of the 2.9 million 21- to 27-year-olds currently covered by nongroup health insurance — that is, those most likely to run from higher premiums — would be eligible to receive health insurance subsidies either through the exchanges or through the expanded Medicaid program,” they note.
I emailed Urban Institute’s Linda Blumberg to find out why they cut off at age 27 (the age bands in the health law go to 29) and she said the biggest impact is on the younger people (some of whom will choose to stay on their parent coverage). If they had included 28 and 29 year olds, they would “water down” the premium effects on young people. So, in their model, they may be overstating the impact and, in their study, the impact was much less than the actuaries’ study found.
