The first batch of 2015 rate filings for health insurance
plans to be offered on exchanges
show that premiums are likely to increase significantly, although in some cases not as steeply as initially anticipated. Insurers, basing rates on incomplete data on enrollees in this year's recently concluded sign-up period, are erring on the side of caution, in many cases with double-digit planned increases.
In Arizona, the only submissions that are public at this point are those that are proposing premium increases of more than 10%. That's because rate hikes of that magnitude require a public comment period. Two insurers, Humana
, surpassed that threshold. Humana is proposing average premium hikes of 25.5% for 2015, while Cigna wants to boost rates by an average 14.4%.
Increases are being driven in part by a reduction in the reinsurance funds available to subsidize insurers with inordinately expensive customers. In 2014, there was $10 billion available from the federal government to help cover the costs of individuals who pile up more than $45,000 in claims. That figure will be reduced to $6 billion for 2015.
The American Academy of Actuaries anticipates (PDF)
that insurers' costs will increase by 4% to 7% because of that reduced funding.
Rates are also being driven higher by increased taxes associated with the Patient Protection and Affordable Care Act
. That's anticipated to add 0.7% to rates for 2015.
On Washington state's exchange, expect to see greater competition and higher prices in 2015. A dozen plans submitted 114 products for sale on the exchange when the 2015 open enrollment period begins Nov. 15. That's up from eight insurers selling 46 products during the 2014 open enrollment period.
Among the new players in the market: UnitedHealthCare
, the country's largest insurer. Company officials have indicated that it will compete more vigorously in the exchanges in 2015 after taking a cautious approach during the first open enrollment period.
Washington proposed premium increases vary significantly. Group Health Cooperative and Coordinated Care Corporation proposed rate hikes of 11.2%, while Molina Healthcare of Washington proposed decreasing its premiums by 6.8%. Group Health and Coordinated Care each captured roughly 15% of business during the 2014 open enrollment period. Molina was a much smaller player, with just more than 1% of exchange enrollments.
Insurers, in scrambling to assemble products for sale during the next open enrollment period, are trying to do so with incomplete data about the customers that they gained during the recently completed sign-up period. That's in part because there was a surge of enrollments during the final weeks, leaving little time to crunch that final surge demographic data.
The upshot for insurers is that they don't know how sickly, and therefore expensive, many of their new customers will be. That means they'll be extrapolating from what information they do have in order to come up with sound rates.
“The only thing that we know now that's different from what we knew a year ago was who enrolled,” said Cathy Murphy-Barron, chair of the American Academy of Actuaries' Committee on Federal Health Issues.
The deadlines and rules for insurance filings vary across the country. But several states, including Washington, require that insurers submit products for coverage that takes effect in 2015 by May 1. The numbers should be viewed with a significant caveat: They're subject to review by state regulators and therefore aren't finalized. The proposed rates could shrink significantly under scrutiny by state officials.
In Virginia, proposed average increases range from 3.3% for Kaiser Foundation Health Plan of the Mid-Atlantic States to 14.9% for CareFirst BlueChoice.
While double-digit increases might seem dramatic to some, given the various cost pressures involved, analysts at J.P. Morgan determined that the initial data suggests premium spikes lower than anticipated.
“Although still likely large enough to draw political criticism, we view hikes at this level as relatively modest in relation to the highest expectations given several factors pressuring rates,” the investment firm's analysis concluded.
Murphy-Barron cautions not to read too much into the initial filings. “All of this stuff is very state specific,” she said. “It's very hard to generalize across the entire country.”
HHS secretary nominee Sylvia Matthews Burwell
is poised to gain confirmation with bipartisan support. She encountered little resistance during a second Senate committee hearing on Wednesday. But Burwell did raise some eyebrows by suggesting that the agency will be seeking to claw back funds from states that spent tens of millions of federal dollars on failed exchanges. Burwell said she intended to use the “full extent of the law” to recoup “misused” funds. Problem-plagued online marketplaces in Maryland, Massachusetts, Oregon and Nevada are likely targets.
Insurers paid out $513 million in premium refunds in 2012 for failing to meet medical-loss ratio standards established under the ACA. That was roughly half as much as health plans refunded to customers in 2011, according to a report published by the Commonwealth Fund (PDF)
. Insurers in the individual and small group markets are required to spend at least 80% of premiums on medical claims and expenses intended to improve the quality of care. For large groups, that threshold is 85%. Follow Paul Demko on Twitter: @MHpdemko