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.