Is It Up, Up and Away for 2015 Premiums? CBO and Actuaries Disagree

By Steve Davis - April 17, 2014 Will premiums for exchange-based health coverage skyrocket this fall? The Congressional Budget Office doesn’t think so. In a report released April 14, CBO and the Joint Committee on Taxation predicted lower costs than initially projected due largely to the way health insurers have restructured the plans (e.g., using narrow networks and lower provider reimbursement rates). But based on my interviews with health plan actuaries, it seems to me that up is about the only direction health coverage prices can go. During WellPoint, Inc.’s Investor Day March 21, executives conceded that exchange premiums in 2015 will likely need to go up by “double digit plus” levels. WellPoint participates on 14 public exchanges and probably is the single-largest seller of qualified health plans on exchanges. Health plan actuaries agree that it’s too early to know how much rates will rise for 2014, and health plans are still a little in the dark about what their risk will look like. But Chris Carlson, a principal and consulting actuary at Oliver Wyman, says the underlying risk, in a best-case scenario, will increase rates 6% to 8%. Lower-than-expected enrollment could add another 1% to 2%. The insurance tax, which became effective this year, may add an additional 0.5% to 1.0% to premiums for 2015 as the tax increases from $8.0 billion to $11.3 billion. The overall impact the insurance tax will have on 2015 rates, compared to what’s built into 2014 rates, is about 0.5%. The scheduled reduction in federal transitional reinsurance payments could require rates to increase in the individual market even without any of the other rate-influencing forces, says Hans Leida, Ph.D., a consulting actuary at Milliman. And preliminary data from pharmacy benefit managers Prime Therapeutics and Express Scripts indicate those new members also tend to use more costly specialty drugs than do people with non-exchange based commercial coverage. Actuaries are conservative by nature, so even the general uncertainty surrounding exchanges could impact rates. The more uncertain the environment, the more margin actuaries want to build into the rates. What do you think? Will carriers be able to keep rates low for 2015? See the CBO report at www.cbo.gov/publication/45231. http://aishealth.com/blog/health-reform/it-and-away-2015-premiums-cbo-and-actuaries-disagree?utm_source=Real%20Magnet&utm_medium=Email&utm_campaign=38613482