Welcome to the convergence zone. Rates are still being formulated for the 2015 open enrollment/new product period, but initial estimates are being released by state regulators. There are two things to note. The first is that companies seem to be operating reasonably independently in their 2014 rate estimates so the 2015 corrections are all over the place. Some companies were too optimistic in 2014 so they are raising rates to cover costs; other companies were too pessimistic so they are cutting rates to attract membership. Reasonably random error and noise is a good thing, esepcially if we assume that 2014 really could be treated as the Exchange beta testing year.
The second thing of interest is rates will start converging. Companies are operating off of less incomplete information than they did in 2014, so assumptions are being validated or replaced by actual data. Insurance companies are in the business of massive data mining and projection, so more data is usually better. Similar products with similar networks will be priced reasonably close to each other. Information and search costs for individuals should decrease significantly as the products are operating under less adverse information biases.
LifeWise has proposed an 8.9 percent rate increase.
Other insurance companies with large chunks of the individual market — Coordinated Care Corp. and Group Health Cooperative — are both proposing rate increases of just over 11 percent.
All four companies had similar monthly rates in 2014 and would likely come even closer together in 2015 if their proposals were approved by the state:
■ Group Health’s average silver plan for 2014 was $280.47 and would be $312.50 in 2015 if its price increase is approved.
■ Premera would go from $300.94 to $328.03 for a similar plan.
■ LifeWise would go from $301.07 to $329.36.