Premium shocks will occur next year for catastrophic plans.
The high-deductible plans, which aren’t eligible for subsidies, were only supposed to be available to people under 30 or people who were unable to afford other coverage. Then the controversy over canceled health plans erupted last fall, and the Obama administration said anyone with a canceled plan can purchase catastrophic coverage.
At the end of February, young adults (ages 18-34) had accounted for 91 percent of all people picking catastrophic plans. By the end of enrollment, though, young adults accounted for 83 percent of all catastrophic plans. So that suggests that some people who had canceled plans did sign up for catastrophic coverage near the end of enrollment, but still a relatively small amount. Just about 89,000 people in all chose catastrophic plans in the federal exchange states.
The catastrophic plans that were sold in 2014 were priced for only 18 to 29 year olds. That is the healthiest and cheapest group to cover and even then, there is significant age based variance. Looking at Healthsherpa.com, the cheapest catastrophic plan in my zip code for a 29 year old is 80% more expensive than the same plan for a 19 year old. Adding a bunch of comparatively expensive middle aged adults to an already small risk pool in each state means the pricing model will blow up completely for at least several states. Risk corridor and reinsurance will help, but the models were built with a certain set of assumptions that weren’t seen in reality.
This is not the fault of the insurance companies, they followed the regulations and planning guidance in effect at the time the plans were submitted for regulatory approval.