Among those health-law marketplace enrollees who have seen a doctor or other health-care provider in the first quarter of this year, around 27% have significant health issues such as diabetes, psychiatric conditions, asthma, heart problems or cancer, the data show. That is sharply higher than the rate of 16% for last year’s individual-consumer market over the same time frame, according to the data, which was supplied by Inovalon Inc., a health-technology firm that receives medical claims directly from nearly 200 insurers that are its clients.
It is also more than double the rate among people who held on to their existing individual policies; among those enrollees, the rate was 12%. Those consumers, who kept so-called grandfathered individual plans, are showing by far the lowest rates of use for health-care services such as emergency-room visits, hospital stays and prescriptions.
There are a couple of take-aways.
First — no shit, this was expected.
The chronically ill or intensely acute ill were underwritten out of the old pre-PPACA individual insurance market. If an individual had cancer, if an individual was diabetic, or had any number of serious and not so serious pre-exisiting conditions, they were excluded in most states. The exclusion worked by either companies not offering coverage at all. Mayhew Insurance would not offer coverage at any price on the individual market to someone with a cancer diagnosis in the past ten years. Or they were excluded because the rates were astronomical. A diabetic could expect to see rates three times the preferred standard rate. If the rates were too high, people who needed care could not afford to buy without massive subsidies that they were not getting.
Secondly, the grandmothered individuals (the kludge to get around the “keep it if you like it unless you have junk insurance that materially changed since 3/2010” problem) are healthier than average as they were able to get good prices on underwritten insurance. These people are one of the medium size drivers of uncertainty for 2014 premiums as they were priced into the 2014 rate calculations and then removed from the pool. As I stated before, I don’t think this is a long term problem as the pool of people with grandmothered products is small and will only get smaller. The Exchange eligible risk pool will get healthier and younger as the grandmothered individuals get into the risk pool and the younger and healthier populations get into the pool over time.
Third, and most relevant to pricing, the comparison on how sick is the risk pool is not how sick is the current Exchange risk pool compared to the previous individual market. The relevant comparison for rate purposes is how sick is it compared to what the actuaries projected. Given that pricing for 2015 is well within historical norms to slightly below historical norms, I’m projecting that for most plans the risk pool is well within the acceptable variance from the 2014 projections even with the grandmothered individuals out of the pool. Companies knew they were bidding to insure a sicker than average population and most priced close to appropriately for that assumption.