Reform Update: Federal exchanges also likely to see lower rates

President Barack Obama last week touted an HHS report that found 2014 premiums for individual-market health plans in state-run insurance exchanges will be lower than those for comparable, currently available plans. But that HHS report didn't address rates in the federally run exchanges in 34 states. Although those states with “federally facilitated” exchanges have until July 31 to submit rates from insurers to HHS for approval, indications are that FFEs also will see lower rates.

The issue of rates in the federally run exchanges was raised Monday when congressional Republicans sent a letter to HHS Secretary Kathleen Sebelius asking for information on the rates in the exchanges that will be run by the feds.

But that information will not be available until early September, given that HHS will spend August approving the rates submitted by FFE states. Caroline Pearson, vice president of the health reform practice at Washington, D.C.-based consultancy Avalere Health, notes that the statutory deadline for HHS to notify insurers that their rates have been approved is Sept. 4.

On the 11 state-run exchanges that have released rate information, an individual-market exchange policy will cost an average of 18% less than a comparable policy today, according to HHS' report.

“I do think most of federal exchange states follow this pattern of (rates) looking a little bit lower than expected,” Pearson said. Even though the federal government has said it will not be actively negotiating rates with insurers, unlike state-run exchanges in California and Oregon, what will drive down rates is insurers competing on the exchanges and consumers being able to compare prices on an apples-to-apples basis, she added.

Rachel Dolan, a policy specialist on healthcare reform at the National Academy for State Health Policy, said states with federally run exchanges will vary in whether premiums drop. One factor, she said, is whether a state with a federally run exchange has already implemented insurance market reforms. Another is the number of insurers participating in the exchange.

Following in the footsteps of UnitedHealth Group, which last week reported better-than-projected second-quarter earnings, WellPoint did the same Wednesday, with shares hitting an all-time high. Shares of the Indianapolis-based carrier already were up 44% from the start of 2013 until the market closed Tuesday, before the earnings release. Why the good results? During a conference call with analysts, WellPoint CEO Joseph Swedish, who took the helm at the end of the first quarter, said that state insurance exchanges and Medicaid expansion are growth opportunities that are “more compelling than we have seen in years.” WellPoint is second to UnitedHealth in terms of enrollment total.

Follow Jonathan Block on Twitter: @MHjblock