When we look at insurance company filings and rate requests, we need to make a clear distinction between aspirations and acceptable.
For instance, this weekend, my aspirational fitness goal in a non-constrained universe would be a really good lift this evening, an eight mile run tomorrow morning and then a really good sprint series on Sunday morning. However, I have kids who want to do things when I’m home, and my wife has been on kid duty for the past couple of nights as I had work and social obligations in the evenings this week. This means my acceptable goal set is very different from my aspirational goals. I’ll be happy if I can get a home workout consisting of push-ups, reverse push-ups, toddler curls, piggy back stair climbs, big girl shoulder presses and double kid squats this evening, three or four miles tomorrow morning before I take the kids to the dentist, and a water sprint work-out when we go to the pool on Sunday. If I can get that in this weekend, I will have fit my minimal fitness improvement goals this weekend.
There is a big difference between what I would aspire to in a non-constrained universe and what I think is acceptable.
We face those trade-offs every day. Insurance company rate requests are similar. There is a number they would love to get, and a number that works well enough for the product to be offered. Most of the time those two numbers are very different during the early stages of the rate request negoatiation cycle.
We have seen insurance companies submit requests for 10%, 19% or 35% rate increases. We’ve seen companies ask for rate drops. We have seen companies ask for rate increases at or less than nominal GDP growth. Rate request changes are all over the place. From a predictive point of view, there is a modest correlation between initial ask and final approval. Insurance companies know this and they’ll ask for as much as they can get in order to anchor their end of the negoatiation in the most favorable position. However, it is extremely rare for the initial request to be the same or lower than final rates. Final rates for Exchange products will be available in late October.
Charles Gaba is showing this at ACASignups.net.
This is the third 2015 rate change update today; I had already reported on the 25% drop on one of the companies operating on Mississippi’s exchange a few weeks ago, but this makes it official, and also reveals that the 2nd provider (there’s only 2 on MS’s exchange) is only requesting to raise their rates by 6.5%…
Add them up and Mississippi’s weighted average appears to be roughly a 2% decrease…which also sounds about right since the article specifically states that the 25% drop & 6.5% increase will “close the gap” between the two anyway.
The vast majority of Covered California consumers will see low increases in their health insurance premiums for 2015, and many consumers will see no increase or even a decrease. The statewide weighted average* came in at 4.2 percent, with some plans offering weighted average rates that are 8.5 percent lower than current pricing.
In the case of Anthem Blue Cross and Blue Shield, the department deemed the proposal to raise rates by an average of 12.5 percent to be excessive, and directed the carrier to submit new rate proposals for review.
Similarly, the department asked UnitedHealthcare to submit new proposals for plans it intends to sell in 2015. The company doesn’t sell policies in the state’s individual market this year.
The department turned down the request by ConnectiCare Benefits Inc. to raise rates by an average of 12.8 percent, but approved a rate hike averaging 3.1 percent.
And regulators will allow HealthyCT to lower its rates by 8.5 percent, slightly less than the company initially proposed.
In this case, the regulators thought the rate cuts for HealthyCT were too deep, and ordered a slightly higher rate.
Remember, the pricing that we are seeing for most state run exchanges is still aspirational pricing by insurance companies and not acceptable pricing. All Federal Exchange pricing is still insurance company aspirational pricing, so the hyperventilation about premium shock (let’s forget about subsidy mechanisms for the moment) is about as realistic concerning actual pricing as Shark Week is on the dangers of man-eating sharks.