Reprinted from INSIDE HEALTH INSURANCE EXCHANGES, a
hard-hitting newsletter with news and strategic insights on the development and
operation of public and private exchanges.
By Steve
Davis, Managing Editor
October 16,
2014 Volume 4 Issue 20
In March, it seemed improbable if not
impossible that carriers could avoid double-digit rate hikes for 2015 policies
sold on public insurance exchanges. With the health insurer tax, reinsurance
fees, a marketplace user fee and scant information about their new enrollees,
several actuaries told HEX that big rate hikes were almost certain (HEX
3/20/14, p. 1). But proposed and approved premium increases being touted by
state regulators, so far, have been in the low single-digits. Why?
“I think the market is still in a sales
mode — especially this second open enrollment — with a lot of new business up
in the air,” says Erich Blumberg, vice president and actuary, Lockton Dunning
Benefits Co. Most rates on the exchanges represent new business underwriting
and are aggressive, he tells HEX.
Moreover, carriers generally had a
favorable risk experience in 2014, which was not a very different risk profile
compared with their non-exchange 2013 business, says Deborah Chollet, Ph.D., a
senior fellow at Mathematica Policy Research. Carriers also have been
influenced by the medical loss ratio (MLR) requirement of the ACA “and the
distasteful prospect of returning premiums,” she says. Also, in jurisdictions
where the exchange allows issuers to withdraw and resubmit proposed rates,
issuers have consistently resubmitted lower rates, she adds.
Blumberg agrees that, so far,
utilization appears to be below expectations. But that could change as many
previously uninsured enrollees learn how to access the system.
Chollet says she hasn’t seen evidence
that low rate increases for 2015 can be ascribed to narrowing networks,
although she acknowledges that the threat of narrowing networks may have a
dampening effect on some provider prices and, therefore, on medical cost
trends.
But looking only at the average rate
increase offers an incomplete picture of rate changes. While increased
competition might have held down premiums in some markets, some low rate hikes
touted by state regulators are based on rates at all metal tiers, which might
not be an accurate assessment of the rate increases impacting many consumers.
And average rate hikes don’t reflect cost increases in rural areas where there
tends to be less competition.
“There has been a lot of attention paid
to average rate increases in a state…and while that’s an interesting statistic,
I don’t think it really tells the complete story,” says Elizabeth Carpenter, a
director at Avalere Health LLC, a health policy consulting firm in Washington,
D.C. “You really need to look at the percentage increase among the carriers
that have the biggest market share.” Moreover, while some carriers priced
products aggressively for 2014 to capture the market share, others were much
more conservative. Going into 2015, some carriers that didn’t price
aggressively last year have gotten more competitive, she adds.
And with limited information about the
health of enrollees, carriers can’t justify large rate jumps, says Dave
Tuomala, vice president of actuarial consulting for UnitedHealth Group
subsidiary Optum. He adds that when it comes to rate setting, the uncertainty
of the risk or morbidity level of a population trumps competition.
Regulators in some states also have
been more critical of requests for higher premiums. Case in point: The
Connecticut Insurance Dept., in its recent review of 2015 insurance premiums,
altered rate hike requests by health insurers including Aetna Inc. and
UnitedHealth Group, The Hartford Courant reported Oct. 8. Aetna had
sought a 9.4% rate hike for individual policies sold through the state-run
exchange, but the state regulator allowed just a 4.6% increase. UnitedHealth
Group, which is new to the state’s exchange, “overestimated the impact of cost
trend” in its rate request, the state said. It reduced its requested rate by
9%, according to the newspaper.
“It’s hard to justify from a
rate-filing perspective any sort of a significant increase because the state
insurance department typically will want evidence that a double-digit rate
increase is needed,” he explains. Moreover, carriers that wind up with a better
risk than their competitors could wind up paying into the risk-corridor program
to offset higher risk taken by other carriers (see story, p. 1).
By 2016 or 2017, Tuomala says carriers
will have a better idea of the actual risk and will seek rates that more
accurately reflect the market. The upfront investment carriers have made to
participate in exchanges will help to ensure most of them stay put unless it
becomes clear they can’t compete effectively in that arena, he adds.
Rates Won’t Be Final Until November
While several states have released
final and proposed rates, many more have not. And not all of the rate hikes
have been low. Regulators in Iowa and Louisiana have reported significantly
higher average rate increases. Blue Cross Blue Shield of Louisiana, for
example, intends to boost rates by nearly 20%. Another Louisiana carrier,
Vantage Health Plan Inc., is seeking an increase of close to 16%. CMS isn’t expected
to release final rate numbers for federally facilitated exchanges until
sometime between the Nov. 4 midterm elections and the Nov. 15 start of the
open-enrollment period.
Here’s a look at average rate increases
for six states:
- Arkansas: The Arkansas Insurance Dept. in late September projected that overall premiums sold through the state-partnership exchange would decline an average of 2%. Those rates are expected to be approved by HHS next month.
- California: The 10 carriers that sold coverage through the exchange last year were approved to participate again with an average weighted rate increase of 4.2%, according to the state Dept. of Managed Health Care and Dept. of Insurance.
- Colorado: Final 2015 rates for products to be sold through Colorado’s state-run insurance exchange next month will be an average of 1.8% higher than they were for the 2014 plan year, the Colorado Division of Insurance (DOI) said Sept. 22. Twenty carriers filed to participate on the exchange this fall. The tiny average increase was largely the result of the state’s decision to consolidate higher health cost regions of the state by realigning geographic rating areas (HEX 10/2/14, p. 8).
- Iowa: Blues plan operator Wellmark, Inc., the state’s largest carrier, again chose not to sell coverage through the state’s federally run exchange. The Des Moines Register reports that premiums for its off-exchange individual products will increase by less than 6.1%. On the exchange, CoOportunity Health boosted its rates nearly 20%, while Aetna Inc.’s Coventry Health Care, Inc. asked for an average 8.7% increase.
- Minnesota: Policies sold through the state-run MNsure exchange will increase an average of 4.5% for 2015, the Dept. of Commerce said Oct. 1. Among the five carriers participating, rate changes range from a 9% decrease to a 17% jump. The department approved rates for 84 individual plans and 66 small-group products. But that might not be entirely accurate. The Pioneer Press reported Oct. 15 that the weighted average of rate changes from the state’s four returning insurance carriers is 11.8% — more than double the increase reported by the Dept. of Commerce. But last year’s lowest-cost carrier, PreferredOne, opted not to return. The company was the exchange’s top seller, enrolling nearly six in 10 consumers who bought coverage through the state’s exchange. Blue Cross and Blue Shield of Minnesota captured 23% of the exchange enrollment (HEX 9/18/14, p. 1).
- Wisconsin: The state’s Office of the Commissioner of Insurance last month said premium rate hikes will range from 1.8% to 13.1% among the 12 carriers that intend to offer coverage on the federally run exchange. However, two carriers submitted rates that are lower than a year ago. Minnesota-based Medica requested rates that are an average of 17% lower than a year ago, and premiums for plans sold by Molina Healthcare of Wisconsin will be an average of 11% less.http://aishealth.com/archive/nhex101614-02?utm_source=Real%20Magnet&utm_medium=Email&utm_campaign=55511831
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