First inkling for 2015 rates — not bad at all

Insurance companies are starting to file their preliminary plans for 2015 with their state regulators.  This is a long and involved multi-iteration negoatiation involving network adequacy, plan design, fee structures, geographic scope and coffee, lots of coffee.  My company still has a few more weeks before our prelims need to get in, but Virginia has released their preliminary 2015 applications.

The Dow Jones newswire has some interesting tidbits:

The filings show insurers’ planned increases easily outpacing broader U.S. inflation, but shy of the much larger boosts some critics predicted.

For instance, Anthem HealthKeepers Inc., a unit of WellPoint Inc., said it intended to raise premiums by an average of 8.5%…

Virginia filings show other health plans proposing rate increases ranging from 3.3% for Kaiser Foundation Health Plan of the Mid-Atlantic States, Inc., with around 10,000 members in the state, to 14.9% for CareFirst BlueChoice Inc., which said it had about 32,000 members. CareFirst said in its filing that it had seen the average age of its enrollees rise by several years.

This is a first pass validation at how good the respective companies’ actuaries were in their enrollment model.  Kaiser seems like they nailed it, while CareFirst Blue Choice seems to have a model that was significantly optimistic in its age projection.  Some of the variance may have been in the Grandmothering of policies due to “If you like, you can keep it” sideshow.  This kept reasonably healthier and younger people off of some exchanges. 

Overall, a market wide increase of 7% to 10% for community rated policies with unknown risk pool composition is not bad.  That is no worse than most policy increases from my days as a neophyte insurance company bureaucrat.  It is inline with past experiences.  And given the subsidy structure, that type of increase won’t deter too many people from buying subsidized insurance next year.

54 replies
  1. 1
    Yatsuno says:

    You know this will get reported as, “RATES SOAR UNDER OBAMACARE!!!” regardless of what the actual numbers say right?

  2. 2
    Morzer says:


    More accurately “GOP sore under Obamacare. Suffering from skin color related itch and rashness.”

  3. 3
    Yatsuno says:

    @Morzer: Heh. Best part is it’s their plan that’s causing it.

  4. 4
    Morzer says:


    “I love it when a plan comes together!”

  5. 5
    dr. bloor says:

    @Yatsuno: My first thought as well. The only solace is that even if rates had dropped to zero, the Right Wing Wurlitzer would have had an even crazier explanation of how it was a bad thing. Which, of course, would have been lapped up by the clear-thinking critical thinkers like Wolf Blitzer in our ever-vigilant media, and really pissed me off.

  6. 6
    Yatsuno says:

    @dr. bloor: It would be bad becuz Communist Saul Alinsky Jeebus think of the childrens best healthcare on the planet ruined etc.

  7. 7
    Morzer says:


    That’s ok, you can just give us the executive summary:


  8. 8
    Yatsuno says:

    @Morzer: Okay I know this is heresy and all but gonna say it anyway.

    I am BORED with Benghazi!

  9. 9
    Morzer says:


    But it’s a floor wax and a dessert topping and it keeps Trey Gowdy’s hair in place!

    How can you possibly be bored?

  10. 10
    Amir Khalid says:


    a floor wax and a dessert topping

    I’ve often wondered abut this phrase: is there an actual product sold in America that you can put on your dessert and wax your floor with? (He asks in all innocence.)

  11. 11
    Morzer says:

    @Amir Khalid:

    Philadelphia Cream Cheese, maybe?

  12. 12
    dfinberg says:

    @Amir Khalid: Not exactly a floor _wax_, but shellac is pretty close.

  13. 13
    dr. bloor says:

    @Amir Khalid: It’s an old Chevy Chase/SNL bit.

    Now that I think of it, a really old bit. Gak.

  14. 14
    dr. bloor says:


    Philadelphia Cream Cheese, maybe?

    My kittehs are interested in your ideas and would like to subscribe to your newsletter.

  15. 15
    Morzer says:

    @dr. bloor:

    Following Ron Paul’s principled example, I don’t write or read my own newsletter.

  16. 16
    Fuzzy says:

    Gowdy’s hair has a santorum shine to it and his nose has a brown smudge.

  17. 17
    Amir Khalid says:

    If anyone’s curious, I asked because the other day someone in these threads claimed that the only difference in ingredients between foam insulation and whipped cream in a can is that the latter has sugar in it.

  18. 18
    John D says:

    @Amir Khalid: It’s from an old Saturday Night Live skit.

  19. 19
    Matt McIrvin says:

    @dr. bloor: Some may have encountered the SNL joke via the reference dropped in the old Infocom text adventure Lurking Horror, which had “Frobozz Magic Floor Wax and Dessert Topping”.

  20. 20
    Dennis says:

    How exactly is 7-10% bending the cost curve? You’re talking 3-5 times the base rate of inflation. Still unsustainable.

  21. 21
    grape_crush says:

    > It is inline with past experiences.

    Yup. Average rate in growth of premiums in the early 00’s was in the 10-14%/year range.

    And this news is nothing that should be considered a surprise. From 2011:

    The actuaries of the Centers for Medicare and Medicaid Services have estimated — and Sheils agrees — that private health insurance spending over the long-term will settle into about a 6 percent increase per year. But, Sheils says, there will be “lots of bumps in the interim” as insurers try to anticipate costs.

    CMS’ projections show a big bump in 2014 (when the bulk of the law kicks in) — a 9.4 percent increase in private insurance spending — before its estimates come back down to around 6 percent. The total national health expenditures also spike at 8.3 percent in 2014, and then go down to around 6 percent or 6.5 percent through 2020.

    I thought this was interesting too:

    Health insurance premiums have risen 196 percent since 1999, with worker contributions growing 182 percent. Meanwhile, wages have grown an average of 50 percent since 1999.

  22. 22
    Matt McIrvin says:

    …Still, this isn’t sustainable long-term, is it? I hope the increases level out a bit once the models get better.

  23. 23
    different-church-lady says:

    Overall, a market wide increase of 7% to 10% for community rated policies with unknown risk pool composition is not bad.

    OK. Raise your hand if your income went up 7 to 10% last year. Anyone? Anyone?

  24. 24
    MomSense says:

    Just want to put out there that the average rate of growth of insurance premiums may have been in the 10-15% range however on the individual market we could get hit with a 33% increase.

  25. 25
    Patricia Kayden says:

    @Yatsuno: Or more good news — for McCain. Either way President Obama won’t get any credit.

  26. 26
    aimai says:

    Just wanted to say that I figured the typo in the original heading “Inling” was just some special term of insurance art. I’ve been so cowed by all the specialized language thrown around here.

    I do have a question–is there any insurance scheme, including single payer, in which the costs associated with covering everyone don’t go up every year? There are more people to cover and they are older and sicker, by definition, every year. Is the increase in costs invisible in some systems but just highly visible because it is paid by the individual in ours?

  27. 27
    CaseyL says:

    The rate increases are not tied to an inflation rate. They’re tied to claim payments versus premium payments.

    Every year, insurance companies recalculate premiums based on “experience”: 1 – 3 years of accumulated data on how much money came in (premiums) versus how much money went out (claims). The calculations are done according to established formulae, by procedure, region and demographics.

    Rates almost always go up.

    Obamacare is a brand new policy structure. Its initial subscriber pool had no “experience” to draw on, so insurers had to take their best guess.

    Now they have a (projected) year’s worth of data to work with. It’s not surprising premiums will go up, because we know that Obamacare subscribers cluster around older-sicker, and that affects the premiums-versus-claims equation.

    The real test will be rate adjustments in the next 2 years, when the Obamacare population stabilizes and the insurers have a more complete data picture.

  28. 28
    Belafon says:

    @Dennis: Because what Richard is talking about is the insurance companies having to adjust their numbers based on a model of what they thought their new customer base would look like. This is a lot like a publisher thinking a book will only sell 5K copies and then having to do a rush print because 30K people want to buy a copy.

  29. 29
    RaflW says:

    I know adchoice is customized to each person, but I’ll note that just below your post on the FP was a “Tell Sen. Udall Stop Obamacare” ad.

    Neverminding the bad syntax, it appears that while here in Colorado (again) the local Americans for Billionaires/Club for Inequality ad dollars are still flowing against him.

    I hope he has the guts to follow some of the other Dems who are standing up to say “you wanna kick all these decent folks off insurance?” We’ll see.

  30. 30
    DecidedFenceSitter says:

    I had the same “Yeah, I haven’t had a salary increase in X years, and yet insurance is going up 7-10%”, but maybe this’ll be the straw to have some actually discussion regarding the fact that all the wage increases in corporate life have been eaten by healthcare increases.

    Oh wait, it is an election year shortly. Never mind. Noise and fury only.

  31. 31
    RaflW says:


    You’re talking 3-5 times the base rate of inflation. Still unsustainable.

    A couple thoughts:
    1. Overall inflation numbers as reported are always suspect. They omit several key components in their ‘basket’ of goods. A more relevant issue is health care costs relative to GDP growth (and even GDP is not a perfect number).

    2. 6% is probably too high long term. But as mentioned above, this is a first-year system-wide recalibration after a huge (though I’d suggest positive) market disruption. If annual increases continue on that path, its more of a worry. We have to wait.

    3. How is ACA changing total healthcare spending? Insurance premiums on the exchanges are only a fraction of total spending. How are corporate policy rates adjusting for ’15? What about spending on Medicaid, subsidies and even Medicare? How much are individuals spending out of pocket in ’14 vs. ’13 or previous, as many more basic care items are free or have limited copays now? How much less are hospitals writing off or passing thru to others who are able to pay because of reduced indigent care?

    So many questions beyond topline premium rate hikes!

  32. 32
    JoyfulA says:

    @Morzer: Does anyone else think Trey Gowdy makes Lindsey Graham look like a mountain man?

  33. 33
    dmsilev says:

    @JoyfulA: Someone described Gowdy as Draco Malfoy’s idiot brother.

  34. 34
    RaflW says:


    all the wage increases in corporate life have been eaten by healthcare increases.

    That’s an important discussion to have (and, as you say, won’t happen much in the absurdity of national campaigns).

    However, the bigger issue to me is that corporate wages have not at all kept pace with corporate income growth. Only a small fraction of high-level execs, and big shareholders, are getting almost all the gains, and the workers get bupkus.

  35. 35
    hoodie says:

    @RaflW: Unfortunately, however, you can expect the usual trolls to jump on the topline premium numbers to the exclusion of the type of detailed multivariate analysis you describe. That’s why there’s not much to be achieved by talking about rates and economic impact now except to say that the rate increases do not warrant any particular conclusions regarding the effectiveness of the ACA in bending the cost curve.

  36. 36
    Suzanne says:

    @Amir Khalid: It’s from a Saturday Night Live sketch. One of the fake commercials.

    LMMFAO. I am imagining reading this from your perspective, and it’s even funnier.

  37. 37
    Paul in KY says:

    @dr. bloor: Think it was Dan Ackroyd. Very funny anyway, whomever did it.

  38. 38
    Paul in KY says:

    @Suzanne: Turned out it was the great Gilda Radner. I think I was thinking about the ‘Bassomatic’ commercial.

    Amir, you should google that one!

  39. 39
    Amir Khalid says:

    @Paul in KY:
    I just did. It’s, well, an interesting way to consume fish.

  40. 40
    chopper says:

    @Amir Khalid:

    “wow, that’s terrific bass!”

  41. 41
    jl says:

    Thanks for a very useful update. Hope RM keeps us posted, since I am sure unhinged, but very self-serving, rate scare mongering will be a big business in certain quarters over the next six months.

    Edit: I’m not sure where to find good historical statistics but it would be useful to have those handy, since I am also sure people in certain quarters will talk like insurance rates never rose ever ever before the ACA. Anyone know where to find some good historical time series of rate hikes before Obama Pol Potted US medical care?

  42. 42
    Roger Moore says:


    all the wage increases in corporate life have been eaten by healthcare increases.

    All the wage increases have gone to management rather than line employees. This is the other thing they really don’t want to talk about: increased earnings inequality. Looking at earnings in the aggregate hides the change in distribution.

  43. 43
    TG Chicago says:

    Surely this is a dumb question, but I’ll ask it anyway:

    A recent NewsMax headline said something like “Obamacare rates go up depending on which side of the street you live on”. If that street happens to be a ZIP Code boundary, I could see that being true. But hasn’t that long (always?) been the case for private insurance companies?

    It’s almost like saying “Rates are higher on Wednesday than they were on Tuesday!” if Wednesday happens to be your 55th birthday.

  44. 44
    dr. bloor says:


    OK. Raise your hand if your income went up 7 to 10% last year. Anyone? Anyone?

    When you think about the process of turning health care costs around, think “ocean liner,” not “bicycle.”

  45. 45
    Gene108 says:

    I wish we had a 7% med insurance increase this year. We had a higher than expected claims year and are looking at a 20% rate hike.

    Why any employer – especially small to mid-size employers – would want to put up with the hassle of insurance renewal over single payer is beyond me.

    Also, WRT medical inflation, when are providers going to be held accountable for raising their prices? As well as device and drug makers for pushing more expensive products that have only marginally better efficacy?

    Insurance companies get the blame for what is wrong with healthcare in America, but they are not the driving force behind most of it; they just happen to foot the bill.

  46. 46
    Morzer says:

    @dr. bloor:

    Also, that insurance costs are only part of the equation.

  47. 47
    Paul in KY says:

    @Amir Khalid: It really skewered the kinds of fast talking infomercials we are subjected to over here (since those days & before).

    Glad you liked it.

  48. 48
    Paul in KY says:

    @TG Chicago: Don’t read the Noisemax.

    ‘2 lies in the front & Noisemax in the back, Nothing good gonna come out of that.’

    Bonus points to anyone who can figure out which recent song & the act I have appropriated a lyric from.

    They’re pretty fly…

  49. 49
    Kropadope says:

    @different-church-lady: Does double count? Started from a low base though.

  50. 50
    Richard Mayhew says:

    @TG Chicago: Yep, zip codes are important for some company pricing models. Others will use municipal or county boundary lines as well.

  51. 51
    Someguy says:

    My mid-atlantic Carefirst Blue Choice rates went up close to 50% for 2014. Another 15% is going to suck. Oh well.

  52. 52

    On my blog, Dec 2009:

    The health insurance companies have every incentive to raise their rates to soak up the cash that their policyholders would otherwise save. With a mandate, an oligopoly, and poor regulation, there is nothing to stop them from doing so. In this scenario, a family has to have a very high income in order to save, and money to save is what makes a family middle-class.


    The Democrats are going to get the blame for the huge charges the bill imposes. Even though the bill probably will lead to an improvement in the quality of life of many Americans in the short term, the negatives will expand in the public mind, and the public will resent the cost. It will be seen as direct proof of government corruption. People who personally know people ruined by the mandates will speak their minds, and we may be sure that their voices will be heard. What will the public finally do, I wonder?

    The post was titled Health Care: Bad Politics.


    This comes on top of the hideous news about the impending collapse of the Antarctic ice shelf. This corvid is not having a good day.

  53. 53
    RaflW says:


    Insurance companies get the blame for what is wrong with healthcare in America, but they are not the driving force behind most of it; they just happen to foot the bill.

    Indeed. And look at how device manufacturers have freaked out – and lobbied like mad – over the ACA tax. Very powerful folks making serious money, but it’s the insurance cos that take the rap.

  54. 54
    Dennis says:

    @hoodie: Not everyone who disagrees with you is a troll.

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