Paul Demko l June 1, 2015
Health insurers are asking federal and state regulators to sign off on double-digit rate hikes for hundreds of Obamacare plans next year, increases that are being driven by skyrocketing drug costs and better data on how healthy or sick their customers are.
On Monday, the Obama administration posted proposed premium hikes from a wide range of carriers — including major players like Blue Cross and Blue Shield plans — and their rate requests provide the most comprehensive preview yet of what insurers expect for the 2016 enrollment season.
With some seeking hikes of more than 20 percent, the Obama administration quickly tried to tamp down fears of out-of-control insurance costs and insisted the proposals will receive tough scrutiny and will likely come down.
“These specific rates will be subject to vigorous rate review and revision,” Andy Slavitt, acting administrator of the Centers for Medicare and Medicaid Services, said in a statement.
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That didn’t stop Republicans from decrying the proposed increases. “Despite being promised that Obamacare would lower premiums, it is doing the exact opposite,” Sen. Richard Burr (R-N.C.), who sits on the Senate Finance Committee, said in a statement.
Insurance experts warn that the filings don’t yet allow any solid conclusions about next year’s marketplaces. The data released so far are all preliminary and only include health plans requesting rate hikes of at least 10 percent. The final rates, due in October, might bear little relation to these initial proposals, they say.
“It is way too early to make any predictions about what the actual trends will be this year,” cautioned Joel Ario, who oversaw the development of exchanges for the Obama administration and is now a managing director at Manatt Health Solutions. “We’re really victims of our own transparency here. It used to be that nobody found out about these things until they were final.”
Insurers cite increased medical costs, particularly drug expenses, as a primary driver of the proposed increases. In addition, Obamacare programs designed to entice insurers into joining the marketplaces by protecting them from financial risk are starting to be phased out, meaning companies are directly bearing more of the costs of covering exchange customers.
And the data don’t include proposed rates in many states with their own exchanges. Most notably, California and New York rates are still not available.
Some health plans, particularly Blue Cross and Blue Shield carriers, are seeking major hikes. The Blues plans with top market share in Maryland, New Mexico and Tennessee all want increases of at least 30 percent.
The Blue plan in Illinois is requesting a 23.4 percent average rate hike for individual plans, including a 29.1 percent increase for an HMO product covering 330,000 people. The Illinois plan justifies the latter request by pointing out that claims outpaced premiums by nearly $300 million in 2014, the first year of exchange operations.
Even within a single plan, rate proposals can vary dramatically. The Illinois Blue is proposing changes that range from a 5 percent decrease to a 49 percent increase depending on the product.
Caroline Pearson, a senior vice president with consulting firm Avalere Health, cautioned that the numbers shouldn’t be cause for concern given that the data is preliminary. “It’s easy to panic when you see really high rate increases,” she said. “The market’s not blowing up. These are not warning signs of catastrophe.”
Not all states are seeing large proposed hikes.
Florida, which enrolled more individuals in 2015 exchange coverage than any other state, looks likely to experience relatively stable rates. Just one insurer, Aetna, is seeking double-digit increases for plans sold on the individual market. The company wants to raise premiums for plans sold under the Coventry brand by 16 percent and others by 20 percent, according to the filings. Those plans had just over 320,000 customers in the state.
Ario noted Monday that the marketplaces’ continuing fluidity underscores the importance of consumers reviewing their options when the open-enrollment window opens on Nov. 1, rather than just simply re-enrolling in their existing plan. “At some point it will get more predictable; it’s not there yet,” he said. “So shopping is absolutely critical.”
Insurance experts warn that the filings don’t yet allow any solid conclusions about next year’s marketplaces.
The Obama administration doesn’t have much power to hold down rates. It can’t negotiate with insurers or kick them out of the marketplace if their rates are deemed unreasonable. What federal officials can do is essentially shame health plans proposing unreasonable hikes through public transparency.
The ability of states to challenge rates varies, too. A dozen states have no authority to reject premium hikes.
“The rate review process kicks off an important set of steps designed to provide consumers and others the opportunity to weigh in on proposed rate increases of 10 percent or more,” Slavitt said. “The final rates consumers will see this fall will reflect the breadth of choice and competition in the marketplace.”
Even if rates go up significantly, it doesn’t necessarily follow that plans become more expensive for most consumers. That’s because more than 80 percent of exchange customers qualified for Obamacare subsidies this year, which are tied to income available to households with incomes up to 400 percent of the federal poverty level.
Hovering over the rate-setting season is the King v. Burwell lawsuit currently before the Supreme Court. If the justices rule against the Obama administration, millions of residents in at least 34 states that haven’t established their own exchanges could lose access to the subsidies. A ruling is expected by the end of June.
The proposed 2016 rates largely don’t account for the possibility that subsidies could be eliminated, which would throw the insurance markets into chaos.
Source: Politico
http://www.politico.com/story/2015/06/insurers-seek-double-digit-obamacare-hikes-118524.html?hp=r2_4