It’s rate increase season, and as we head into the second ACA enrollment season, it’s hard to understand why some rates are going up, some down – sometimes in the same place.
Also, some of the rates we’re hearing about are proposals. Depending on how much regulatory oomph state insurance officials have, the rates may change.
This post give you some ideas on what to watch for and how to think about rate increases in individual states, and what questions to ask the health plans and the regulators in your state. Remember that even in states using the federal exchange, HealthCare.gov, state insurance officials still have a role.
The Alliance for Health Policy (an invaluable resource on this issue) recently held a briefing on rate changes. The full briefing (webcast, transcript, background materials, source list) can be found online here. A recent Health Affairs blog post by Christopher Koller and Sabrina Corlette provides another important resource.
Here are some key points outlined in these two resources:
- Remember these are the rates for the state exchanges – they don’t apply to Medicare Medicaid, or the millions of Americas getting private insurance through an employer. While they are a big part of what we cover, they are a small part of the overall US insurance market.
- The rates you are reading about are BEFORE subsidies. Keep in mind that about 85 percent of people enrolled through the ACA are getting some financial assistance in the form of tax credits and/or cost sharing subsidies.
- Rate review varies dramatically from state to state. Some states truly demand that health plans explain and justify rate increases; others require filings but they then don’t have or use authority to push down the rates.
- States typically are reporting average or weighted rates, but they vary a lot.
- Insurance premiums went up before the ACA became law. This may seem like a “duh” observation but it’s often overlooked. MIT’s Jon Gruber at the Alliance event cited a study of rates from 2008-10. He said premiums grew an average of more than 10 percent a year but there was “high and variable premium growth in the individual market.”That was variability both between and within states.
- States that allowed noncompliant plans to continue may have bigger rate increases than those that took the political hit and let them be cancelled last year. Healthier people may have stayed in their old plans if they had the option. This is not the only factor in increases, but it plays a part.
- The insurance market changed a lot once the ACA kicked in. Insurers had to do a lot of guesswork about who would enroll, and what kind of health expenses they would experience. There is still a lot of guesswork. A lot of the newly insured didn’t get covered until March or April, and it can take about three months for claims to work their way through the system. Insurers don’t have a full picture of their clients for 2014, let alone for 2015. “It’s an educated guess,” saidElizabeth Hall, vice president for federal affairs at WellPoint. “We tried to make it as well educated as we could, but it is a guess. And then you fast forward to today as we are looking at and filing our 2015 rates, and you have to ask yourself, what additional information do you have?”
- The pool of reinsurance money for insurers is smaller in 2015 than 2014 − from $10 billion to 6 billion, according to Cori Uccello of the American Academy of Actuaries − so there’s less protection baked into the rates.
- Insurers aren’t the only players. The underlying trend is the overall cost of health care, whether and how much it’s slowing and for how long. Health plans “have proven pretty helpless however at influencing the underlying utilization patterns of whole populations and, particularly in concentrated markets, the prices of hospitals, physicians and other providers,” Koller and Corlette write. “All stakeholders – regulators, providers, purchasers and the general public – would do well to stay focused on what is happening with medical trend and what sort of reform will keep costs in check and less on the ability of insurers to shift these costs between various products and purchasers.”
