There's a battle brewing behind the scenes to keep health plans affordable for consumers. The Obama administration weighed in this week, sending letters to insurance regulators in every state and Washington, D.C., that ask them to take a closer look at rate requests before granting them.
Under the Affordable Care Act, state agencies largely retain the right to regulate premiums. So far only a handful have finalized premiums for the coming year, for which enrollment begins in November.
In the administration's letter Kevin Counihan, the CEO of the federal health exchange, HealthCare.gov, said recent data suggest that rates shouldn't be allowed to go up as much as some insurers are proposing for plans sold to individuals on the health exchanges.
In Maryland, for example, the dominant insurer on the exchange, CareFirst, is asking for a rate increase of 30 percent for some of its plans. In Kansas, Blue Cross and Blue Shield of Kansas is seeking increases averaging 37 percent.
Still, wrote Counihan, "many issuers are reporting a decline in pent-up demand for services," which would support lower premiums. The letter also said that health care costs are not growing as fast as some had predicted, "even accounting for rapid growth in pharmaceutical costs."
Several recent studies bolster the administration's case.
An analysis of proposed rates by the consulting firm Avalere Health found that for a 50-year-old nonsmoker, premiums for the lowest-cost silver plan will rise by an average of 4.5 percent in the eight states they studied. Average premiums for the second-lowest silver plan will rise by only 1 percent. (Most analyses of premiums look at silver-level plans because they have been by far the most popular, attracting more than two-thirds of those who have signed up using the exchanges.)
A separate analysis by the Kaiser Family Foundation found similar results: increases should average about 4.4 percent for the two least expensive silver plans in the 10 major cities it studied. (Kaiser Health News is an editorially independent project of the Foundation.)
Both analyses, however, warn that consumers may only be able to avoid increases by changing insurers. "In these markets, consumers will need to balance continuity of care with lower monthly premiums when comparing their health insurance options," said Avalere Senior Vice President Caroline Pearson.
But insurance industry consultant and frequent Obamacare critic Robert Laszewski says that forcing people to change plans in order to avoid huge increases is just one problem of many. "There's big trouble in Obamacare land," he said. "The biggest carriers are losing their shirts" and thus seeking the biggest rate increases.
Why the disagreement? Mostly because there are outside factors pushing insurers to both raise and lower premiums.
For example, some insurers underestimated how many sick people would sign up, or how sick they would be. Those that guessed wrong and ended up spending more on care than they collected in premiums need an increase to make up the difference.
In some cases, state insurance regulators urged insurers to raise premiums in order to remain financially solvent. "For example," reported the Commonwealth Fund in a recent paper on premiums, "in approving final 2016 rates, the Oregon Insurance Division required some carriers to increase their rates. Tennessee's state insurance commissioner also suggested that a requested average increase of 32.6 percent by Community Health Alliance might not be sufficient to make the nonprofit co-op financially sustainable."
But other analysts say that because most of the sick people are already signed up, those who will join in the future will be healthier and use less care, which argues for lower premiums, or at least smaller increases. "The industry has unanimously and reasonably expressed the view that the least healthy people would sign up first – i.e. in 2014 – thus necessarily resulting in a healthier and less expensive pool of enrollees in 2015 and 2016," wrote Jay Angoff, a former Missouri insurance commissioner and former federal official, in comments opposing CareFirst of Maryland's proposed increases. "Nevertheless, (CareFirst) has assumed that its 2016 enrollees as a group will have worse health status and higher claims costs than its 2014 enrollees did. Even modestly more reasonable assumptions in this area could reduce (CareFirst's) proposed rate increase to single digits."
Some plans also appear to be trying to increase premiums for 2016 to protect against losses in 2017. That's when special programs included in the ACA to protect insurers from very high risks will expire. The Obama administration has been trying to reassure health plans that enroll unexpectedly expensive patients that not only does it have enough money to continue the programs through 2016, but that plans would get even more than they expected in some of these special payments.
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