Many health insurers have asked insurance regulators for sizable premium increases next year, but final rates are likely to be much lower than the ones requested.
There are also several insurers flying under the radar that are pitching lower premiums to marketplace consumers.
On Monday, HealthCare.gov, the federal website for enrollment in exchange plans, listed all the individual and small-group plans for 2016 that are requesting “significant” rate increases. The Affordable Care Act requires HHS to review any health plan that would hike premiums for consumers by at least 10%. Final rates are finalized over the summer and fall.
The price of premiums has been one of the most important factors for people buying an ACA plan. The CMS said Tuesday that 10.2 million people have paid premiums on their plans and have an active policy, as of March 31, compared with the 11.7 million people who selected a plan by the end of this year's open enrollment. Roughly 85% of those who have paid received premium subsidies, which averaged $272 a month.
Several insurance companies stood out with their latest proposals. Blue Cross and Blue Shield of Alabama is looking to boost premiums for individual plans from 23% to 71% depending on the actuarial tier level of the plan. Blue Cross and Blue Shield of Illinois, Coventry, Humana and UnitedHealthcare have all asked for rate bumps of at least 25% for certain plans in Illinois.
The rate requests have provided fodder for conservative groups and Republican lawmakers to denounce President Barack Obama's healthcare law. But the rate-review process highlights only a subset of health insurers and is not necessarily representative of the entire individual and small-group markets.
“It's hard to generalize about rate increases,” said Catherine Murphy-Barron, vice president of health at the American Academy of Actuaries. “They vary state by state and also vary a lot by insurers.”
For some insurers, the rate requests may be actuarially sound, said Jim Whisler, an actuarial consultant with Deloitte. Assurant Health has asked for extremely lofty premium rate hikes in Arizona, Arkansas and Florida, among others. But Assurant has also lost millions of dollars on ACA plans and is looking for a buyer.
Also, HealthCare.gov doesn't offer a complete picture of proposed rates. It does not show the companies that are asking for modest increases or reductions. Charles Gaba, a blogger who tracks ACA insurance polices, found that nearly all individual plans in Washington state next year are looking for rate hikes lower than 10% after adjusting for the plans' market share and tier levels.
Last year, and several years before, some insurers similarly requested double-digit premium increases. HHS nixed some as unreasonable, and the result was generally modest premium growth with a lot of variability.
The varying premium requests indicate that insurers are still unsure of how to gauge this growing patient population, experts say. Aside from medical cost trends and the rising prices of prescription and generic drugs, health insurers have to factor in the medical-loss ratio that caps their profits. They also have to account for the ACA's three premium risk programs—two of which are sunsetting after 2016.
Insurers are able to base next year's premiums on a full year of data from 2014. But technological problems during the first open enrollment and the extension of grandfathered health plans add asterisks to the market.
“We still haven't had one year of complete experience or steady operations for the market to be settled,” Murphy-Barron said.
A major unanswered question for insurers is whether consumers will shop around for better deals. People tend to stick with health insurance policies due to familiarity of providers, apathy or confusion, but the most recent open-enrollment period suggested at least some consumers are taking their business elsewhere if their plan's price goes up too much.
“I think there are some indications people are willing to change plans on the exchanges,” said Whisler, who believes premium increases of 10% or more are likely in 2017 and beyond. “If people do seek the lower increases and are willing to change plans and even physicians, then they're not going to experience as large of a rate increase.”
The King v. Burwell case before the U.S. Supreme Court could make the requested rates meaningless. If justices rule that subsidies cannot be given to people who bought health plans in as many as 37 states that relied on HHS to operate their insurance exchange, millions of people would likely leave the individual market because they can't afford their premiums. The sickest patients would retain their insurance out of necessity, which would force insurers to raise rates and send the individual market into a “death spiral.”
Until the case is settled this month, that scenario is what insurers will be “most concerned about,” Murphy-Barron said.