Competition on the Exchanges

Oh Noes — some company’s actuaries fucked up with their projections and we see a very clear example of the Winner’s Curse in Maryland:

CareFirst of Maryland Inc. and Group Hospitalization and Medical Services Inc., both CareFirst companies, submitted filings to the Maryland insurance department requesting a 30.2 percent premium increase for individual plans in 2015. CareFirst Blue Choice Inc. requested a 22.8 percent increase for next year, citing an older average membership age and a sicker patient pool.

Maryland’s exchange has only five insurers which participated in 2014 and will add another insurer in 2015. All Savers Insurance, a subsidiary of UnitedHealthcare, requested a 4.8 percent. A nonprofit Kaiser Foundation plan offered a 12.1 percent rate reduction and Evergreen Health Cooperative, 10.3 percent reduction. [emphasis mine]

I am not a Maryland insurance expert, but what I predict will happen is that Care First (which tended to have very low rates) will lose a lot of membership to Kaiser and Evergreen and All Savers.  Shifting insurance is a pain in the ass and it is something that us privileged folks in the private sector have never ever had to do. 

Oh wait, it happens all the time as the HR department gets a better quote from the other competitor down the street and they move insurers, networks and plan configurations to save seven dollars per member per month.  My family’s insurance comes through my benefits and thus the insurer has been a constant, but my wife’s company has gone through four different carriers in five years (now they are back to carrier #2). 

Competition is a bitch.

And this is what we should expect as that is the basic design intent of the Exchanges — reduce information and search costs of consumers by requiring insurers to offer reasonably transparent and clearly defined products where people can buy on price, and network and not on the ability to get through underwriting.

New Hampshire is a good case study of how the Exchanges are supposed to work in 2015:

The  New Hampshire Insurance Department said Monday that five insurers plan to sell policies in the suddenly crowded New Hampshire marketplace. It’s a stark contrast from the first open-enrollment period of the law known as “Obamacare,” when only one insurer — Anthem — offered plans….

Overall, five insurers are expected to offer plans through the HealthCare.gov marketplace in the state:  Anthem,  Harvard Pilgrim, Minuteman Health, Assurant Health, and Maine Community Health Options. 

The competition is important. A 2014 study conducted by the National Bureau of Economic Research found that if all insurers active in states had participated in the states’ marketplaces, the second-lowest priced silver premium (which is linked to federal subsidies) would be 11.1% lower. It also would have reduced federal subsidies by about $1.7 billion the study found….

The first open-enrollment season in New Hampshire was successful despite the lack of competition. The state enrolled more than 40,000 people — and about 211% of its original goal, the highest in the country.  

New Hampshire has demonatrated a viable market and insurance companies are now flooding the state to get a chunk of the pie.  Some will offer very narrow networks, others will offer access to Boston’s world class medical systems, and others will have different flavors of customer service.  Anthem has first mover advantage of getting people used to thinking of Anthem as  their insurance company, but that is only worth a couple of dollars per member per month, so they’ll need to offer good deals (either on price or networks) to keep their membership base in the state.

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30 replies
  1. 1
    bloomingpol says:

    Our wonderful Congresswoman Carol Shea-Porter has working so hard to get the ACA working in this state. Ever since she found out that there was only one company available in 2014, she’s been hounding the NH Insurance Department, the White House, HHS, and everyone she can get to, to get more companies. And it worked!
    And I always want to remind seniors that Carol was the one who pushed to get the donut hole in Medicare D closed.

  2. 2
    MomSense says:

    Why do I feel like Republicans are about to characterize competition in the marketplace as a bad thing? Another way of saying this is that they are about to bite the invisible hand that feeds them.

  3. 3
    WereBear says:

    There must be money in health insurance, because all these businesses still want to be in it, despite the rules that say you can’t let people die to make more money.

    This is how I explain regulations: they mean NO CHEATING.

    What happened with the Reagan, and then most strongly, the W administrations was legalized theft. What modern Republicans want is not to get in trouble because they are stealing our money.

    What will stop it is explaining that there will be NO CHEATING.

    Even toddlers understand that.

  4. 4
    Wag says:

    @MomSense:

    Because Cleek’s Law

  5. 5
    rikyrah says:

    the marketplace at work..

    snicker
    snicker

  6. 6
    Davis X. Machina says:

    @MomSense: Nothing is more toxic to the Free Market than a free market. Competition is for the other guy.

  7. 7
    NonyNony says:

    A nonprofit Kaiser Foundation plan offered a 12.1 percent rate reduction

    How long until we hear Republicans screeching that non-profits on the Exchanges are unfair competition because they don’t have to turn a profit?

    That argument is so stupid that someone’s already making it, aren’t they?

  8. 8
    artem1s says:

    and the GOPs answer to NH is to run Scott Brown for the Senate…

    http://www.washingtonpost.com/.....nate-race/

    needs moar popcorn :D

  9. 9
    gene108 says:

    but my wife’s company has gone through four different carriers in five years (now they are back to carrier #2).

    I will never, for the life of me, understand why small to medium sized businesses are not jumping up and down for single payer.

    We got a 20% rate increase this year.

    We did not pass on a few smaller increases over the last five years to our employees.

    Decided to bump up the employee contribution, on the recent payroll, a bit to blunt what will be a large increase and necessary increase in deductibles.

    I can only imagine how easy Canadian businesses have it not having to get into the weeds of dealing with rate increases and pissed off employees.

  10. 10
    negative 1 says:

    As the guy who buys the benefits for my company, here is the success story. Pre-ACA, last 3 years’ premium increases: 10%, 12%, 10%. Post-ACA: -4%, -5%. I know, I know, everything is always more complicated than just a post-hoc argument, but in this case I truly can’t find a different reason.
    To highlight one other thing about how this bill helps everyone, we have a post-retirement benefit plan (healthcare after you retire). The liability we carried flipped from about 1/2 of our operating cash to a surplus thanks to the change in projections now that healthcare costs don’t seem to be headed into the stratosphere. So instead, everyone is getting a raise. Multiplier effect here we come.

  11. 11
    Yatsuno says:

    @gene108:

    I can only imagine how easy Canadian businesses have it not having to get into the weeds of dealing with rate increases and pissed off employees.

    Canadian companies actually do have to deal with benefit structures like this. Depending on the province, things like dental and vision aren’t covered and physio isn’t a decent benefit. (I know this is true for BCHealth, other Canuckistanis can help me with the other provinces.) A lot of companies do offer these as benefits for their employees, but my guess is they are so tightly regulated it’s a much simpler process than the US.

  12. 12
    MomSense says:

    @negative 1:

    So instead, everyone is getting a raise. Multiplier effect here we come.

    I blame Obama.

  13. 13
    gene108 says:

    @Yatsuno:

    The Canadians I have worked with make it a point to pay Canadian taxes (on top of U.S. Taxes) to stay in Canada’s health care system, because they are terrified of the U.S. system.

    They did not talk about supplemental insurance.

    I’m inclined to believe it is not as big an expense as it is in the U.S. for companies and the companies are not the first and only source of this benefit for employees, so there is not the same pressure WRT to pissing off employees, if you get a rate increase.

  14. 14
    Steeplejack says:

    This seems like a good place to drop in my own “winner’s curse” story. I signed up with Kaiser Permanente through the federal exchange (thanks, Virginia!) and paid my first premium in late April for coverage starting May 1. I went to the Kaiser website, created an account, did all the stuff I was supposed to do, etc.

    Come the end of May and I cannot for the life of me pay my premium for June. And I hadn’t received any information about it from Kaiser. Tried (multiple ways) via the website, tried the automated phone system, even finally got hold of a live person who insisted that because I had signed up on the federal exchange I had to pay my premiums there (not true after the first one).

    The website attempts failed in multiple ways, e.g.: (1) I was able to see upcoming premiums and select which one(s) I wanted to pay, but when the navigation went to the “actually pay” page (apparently run by an outside company) all that showed was my May payment and no outstanding balance, so I couldn’t select anything to pay. (2) I wended my way through a different set of pages that looked like a success until I got to a page asking me which Kaiser region I was in—and DC-MD-VA was not listed. End of the line there.

    The phone fail was consistent in that I had to go through a huge number of prompts, entering and confirming information, and then just when I thought it was going to work a nice robot voice would say, “We are unable to handle your payment at this time; please try again in 24 hours,” and hang up.

    I let it lie for a few days and then tried again late last week. Still a fiasco via Web and automated phone system, but when I finally got another real person on the line he admitted that Kaiser had been swamped by the response to the ACA and that they were “running late” in producing invoices. He told me that I would “eventually” get one for June and that there would be no penalty or late fee, but he advised me to mail my payment to a P.O. box in Pasadena, which is what I’m doing today.

    Shorter: I guess when your business is so busy that you can’t print invoices fast enough that’s a good problem to have. But it’s still a problem.

  15. 15
    kindness says:

    Kaiser has been trying to raise the profile of it’s Maryland/DC region. Several higher ups from here in CA now work both regions trying to get it right. Seems they think that the impression they make in Washington might translate across the country.

    Wonder what gave them that idea?

  16. 16
    burnspbesq says:

    @gene108:

    I can only imagine how easy Canadian businesses have it not having to get into the weeds of dealing with rate increases and pissed off employees.

    You don’t have to imagine it. You think it’s an accident that the Big Three assemble far more vehicles in Canada than the Canadian market could ever hope to absorb?

  17. 17
    J R in WV says:

    Everyone, take a look at today’s Google Doodle. It’s the first place winner in their annual competition, drawn by 11 year old who just won a $30,000 college scholarship. It pictures a water purifier animal who drinks bad water and spews cleaned-up water back into the pond!

  18. 18
    Villago Delenda Est says:

    @WereBear: This.

    Corporations HATE actual price competition. HATE HATE HATE HATE HATE it.

    It’s why they work so hard to crush anyone who enters the marketplace and make them behave honestly, because CEOs are parasites who think like parasites and HATE HATE HATE HATE HATE an actual free market.

    Adam Smith knew all about these assholes over two centuries ago and wrote about them.

  19. 19
    ThresherK says:

    “Better quote” from our HR department?

    How about “less worse” or “least objectionable”?

    (And I know enough HR people to appreciate the stuff they have to go thru.)

  20. 20
    kc says:

    hifting insurance is a pain in the ass and it is something that us privileged folks in the private sector have never ever had to do.

    Oh wait, it happens all the time as the HR department gets a better quote from the other competitor down the street and they move insurers, networks and plan configurations to save seven dollars per member per month.

    Yeah, it’s something HR departments do to save money – not something millions of individuals have been forced to do to avoid spending hundreds more dollars a month. When ppl start getting notice of big premium increases on private insurance the government is forcing them to buy, they’re going to be pissed.

    Pardon me for not clapping hard enough.

  21. 21
    Emerald says:

    @Steeplejack: Kaiser is having a devil of a time with their website payment mechanisms. Same thing happened in March. I signed up for automatic payments, which went through just fine in February, but when I checked for March there was no payment. I called Kaiser (yes, you have to be patient but eventually you will get through and they’re very knowledgeable and helpful when you finally get a human on the line). They said that no payments were processed for March, but I was able to pay online and it’s fine. She said it was a known issue and would not affect my coverage.

    The autopay went through fine in April, but in May the same thing happened. I called and they said that the only way I could pay was to send a check. We’ll see what happens in June.

    This is a glitch within Kaiser and has nothing to do with Obamacare (unless they’re just being overwhelmed with new members because of the ACA). I’m not complaining because they’re in the process of saving my life at the moment. I signed up through Covered California as soon as I could. Kaiser has been fantastic. They discovered that I have Stage 0 breast cancer, took it out and found that I had 2 millimeters of actual stage 1 cancer (your average grain of rice is 5mm). No involvement in the lymphatic system, so I’m home free, except that they haven’t yet got all the Stage 0 out. I’ve had three lumpectomies so far. I’ll find out how the last one went on Friday.

    So I’m really grateful to Kaiser for the fantastic care I’ve been getting since I walked in the door, thanks to Obamacare. I went over 12 years uninsured. They’ll get their payment problems solved. Meanwhile, I get to stay alive.

    Thank you Obama and Kaiser.

  22. 22
    Comrade Mary says:

    If you’re curious about the costs of supplemental insurance in Canada, try this. You need to eventually enter an email address to get a formal quote, but you can get prices and all the info you need, then exit before submitting.

    Note that this is for individual insurance: as is the case in the States, you may find that employer-provided supplemental insurance may be a good deal (at a range of prices) or actually more expensive than private insurance: see this. If you buy private insurance, it’s 100% tax deductible as long as your total eligible medical expenses reach a minimum value (3% of total income or about $2k, whichever is lower).

  23. 23
    Steeplejack says:

    @Emerald:

    I’m glad to be with Kaiser too. I like their “preventive care,” HMO-style model. And I’m thankful for Obamacare, because as a cancer survivor (relatively minor skin cancer) I had trouble getting health insurance (as in turned down or slow-rolled several times).

  24. 24
    Mnemosyne says:

    @kc:

    Yeah, it’s something HR departments do to save money – not something millions of individuals have been forced to do to avoid spending hundreds more dollars a month.

    Huh? You realize that if your company switches carriers, you have to go through a whole rigamarole of figuring out if your current doctors are covered by the new insurance, and finding new doctors if they aren’t, right? It’s a giant pain in the ass that employees are subjected to so employers can save a few bucks per employee. Not to mention all of the small shifts that happen every year, plus drugs being dropped off the employer’s formulary. It ain’t like having employer insurance is a trouble-free paradise (and I say this as someone who has very, very good employer insurance).

  25. 25
    NonyNony says:

    @kc:

    When ppl start getting notice of big premium increases on private insurance the government is forcing them to buy, they’re going to be pissed.

    In addition to what @Mnemosyne points out above – you do realize that most of the people on the Exchanges are people who were already paying out of pocket for insurance and now are getting better rates OR are people who couldn’t buy insurance before and were paying out-of-pocket because they were completely priced out of the insurance market (or denied coverage altogether because of a pre-existing condition) right?

    The number of people in the “poor me I’m forced to buy insurance I didn’t want” category is handful of males between the ages of 26 and 30 (because under 26 you get to be on your parents insurance). Most everyone else on the Exchanges is actually HAPPY about finally having coverage rather than feeling like its some kind of burden, and those who do think it’s a burden can just pay the tax and be done with it.

  26. 26
    Richard Mayhew says:

    @NonyNony: Anyways, the subsidy structure (which applies to 80% of Exchange policies) means the Feds eat most of the price increase above the rate of inflation.

  27. 27
    Aunt Kathy says:

    Maryland resident here. I don’t know if it was just because the exchange website here was such a clusterf*ck, but it appeared that the central and western parts of the state wouldn’t have access to either Kaiser or Evergreen. I think Kaiser just didn’t have a presence here, and Evergreen is more of a co-op model, with it’s own clinics. There are no clinics (yet?) west of the Baltimore/DC suburb areas. Unless that changes, the lower prices are not helpful.

  28. 28
    mclaren says:

    Once again, Mayhew is lying to you. He presents hard evidence of drastic increases in health insuranc premiums as though it was a good thing.

    What will actually happen, in contradistiction to Mayhew’s dishonest and fantastical fairytales, is that the alternative insurers will offer premium hikes just slightly lower than the 20% and 20% increases of the current insurers.

    This is how health care in Shithole America works, people. You have a choice between paying outrageously higher prices, or much higher prices. There is no real “competition.” It’s all a kabuki theater show, fake competition in which all the health care providers conspire to fix their prices at just about the same level.

    Many industry insiders are afraid to speak on the record for fear of antagonizing the medical groups they rely on for their survival. Contracting practices are draped in secrecy. Prices are almost impossible to obtain because of “confidentiality agreements” among hospitals, physician groups, insurers and devicemakers who do not want their markups exposed to competition or public scrutiny.

    “…If you were to get a detailed bill of what the hospital was charging the insurance company for the insured patient, those things get marked up to something…ridiculous. There’s no open competition.”

    “While the talk surrounding health reform has been about problems with the health insurance market, and I don’t want to suggest that’s entirely misplaced, I think market power on the part of providers, doctors and hospitals is a bigger issue,” said Martin Gaynor, an economist at Carnegie Mellon University.

    Jerry Flanagan, health care policy director for Consumer Watchdog in Santa Monica, said the heath care system is “in a tug-of-war between warring tribes … over who has market dominance over price.” Flanagan doesn’t think the insurance industry is losing the battle.

    Consumers have almost no control over costs, no ability to shop and little incentive to do so because most patients neither buy their own insurance nor pay their medical bills directly. But they foot the bill in skyrocketing premiums, deductibles and co-pays.

    Source: “Experts warn of medical industry cartels’ power,” San Francisco Chronicle, 2009.

    Richard Mayhew is lying to you.

    He’s telling the fairytale that Republicans love to tell — the magic of the marketplace will somehow lower America’s health care costs.

    Been there.

    Tried that.

    Doesn’t work.

    The magic of the marketplace is bullshit when it comes to health care. Prices never drop, they only increase, because the health care “marketplace” is a corrupt cesspool of confidentiality agreements and sweetheart contracts and cronyism and self-dealing, where the doctors who own the imaging clinic have a special contract with the hospital that locks in sky-high prices and prevents alternative lower-cost health care service providers and keeps all the outrageous prices secret forever.

    Richard Mayhew is lying to you. Email John Cole. Tell Cole to get this corrupt clown off Balloon-Juice and onto the Red State website where Mayhew belongs. The people at Red State will love hearing Mayhew lie about how the magic of the marketplace will mysteriously reduce health care costs — that kind of horseshit doesn’t fly out here in the reality-based community of liberals.

  29. 29
    Fred Fnord says:

    @mclaren: BlahBlahBLAHBlahBlahTheSkyIsFallingBlah. Listen to the conservative AstroTurf talking points, repeated ad nauseam for the rubes. In some places it’s ‘Obamacare is SO SHUH LIZM’ and in some places it’s ‘Obamacare is INSUFFICIENTLY PURE’ but in all cases it’s FUD designed to scare people away from it, desperate to make it fail so that no progress can be made at all ever.

    Meanwhile, the actual liberals, like the ones in Vermont and California, are working to make it better. And the reality-based economists are studying its surprisingly robust success even in its more or less current form, in Massachusetts.

  30. 30

    UnitedHealthcare has an appalling reputation. This looks like a race to the bottom to me.

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