Rate increases

There have been a ton of stories about massive rate increases in the Obamacare market.  This article from Pennsylvania is actually a really good article about the national state of play:

 

Pennsylvania’s largest health insurer has requested a 36 percent premium hike for a plan sold on the Obamacare exchange, and another has requested a hike of up to 58 percent.

Big scary lede.  Some insurers are asking for the moon.

Yet a closer look at premium requests in Pennsylvania shows the situation isn’t clearcut, and it’s not certain people will have to pay dramatically more in 2016.

Many insurers selling plans in Pennsylvania are requesting only modest increases, and some are requesting decreases.

And now for some context in the third sentence.  We are only seeing the high increase outliers as the name and shame element of the PPACA rate regulation mechanism only comes into play when the increase request is more than 10%.  There are plenty of insurers offering plans whose rates aren’t increasing at an astronomical rate.

As a result of receiving that “risk adjustment” information, Geisinger (the 58% requester) is submitting revised requests for lesser amounts, said Bowen, who couldn’t immediately provide revised figures.

As expected, the initial ask by insurers is being revised down.  It is easier for insurers to get state regulators to agree to a lower number from the initial than to get the regulators to agree to a higher number than the initial ask.  That allows regulators and their champions to point to a clear example of their effectiveness at protecting the public.  This is a bit of a kabuki.  In my state, when Mayhew Insurance and our competitors submit rates, there is a de facto implicit fudge factor built into the rates (usually as excess reserve accumulation) that everyone expects to be cut by the third round of review.

Substantial increases in Highmark plans could have a big impact, since the insurer sold exchange-based plans to 219,000 people — nearly half the Pennsylvania residents who bought such plans, and more than any other insurer in the state. …. In western Pennsylvania, a Highmark silver plan had some of the lowest premiums in the country. There’s little doubt that’s the result of the intense western Pennsylvania competition between Highmark and UPMC Health Plan, which also charged some of the lowest lowest premiums. That means the sharpest Highmark increases could be confined to western Pennsylvania.

UPMC, for its part, requested a 9.75 percent increase for one of its plan for individuals, and no increase for the other, according to the insurance department’s website.

Competition matters.

Looking at HealthSherpa, UPMC already had the lowest rates in Pittsburgh for a 40 year old non-smoker, and it looks like the gap between their rates will increase.  The 2015 rates were kept low by competition between the two regional giants, and it looks like UPMC’s lowest price plans will increase by less than 10% while Highmark’s lowest price plan in Pittsburgh will increase by 25%.  The gap between the 2nd Silver from UPMC and the lowest Highmark Silver will be larger in 2016 than 2015.

This means shopping matters.  The Federal government takes on all of the excess cost growth risk for the subsidized on-Exchange population by the subsidy formula.  People whose incomes don’t change at a rate greater than inflation from 2015 to 2016 will see their monthly premium obligation remain the same plus inflation.  Anything above that, the Feds eat the cost.  Highmark buyers in 2015 will have a choice of switching to a UPMC or other, lower cost Silver plan in 2016 to reduce their monthly premium payment, or sticking with Highmark.  We saw in 2015 that people were willing to switch for a better deal.  I think in Pennsylvania, there will be a lot of switching.

 Keystone Health Plan Central requested a two percent decrease for a plan covering small groups, and Capital requested a 2.4 percent decrease for a small group plan. Keystone is owned by Capital, which is based in Dauphin County.

Some prices are going down as plans either get more information about their costs or they are trying to compete for more business based on pricing.

Kaiser looked at costs of the lowest and second-lowest silver plans in 11 major cities around the country and found an average increase of 4.4 percent from 2015. In Portland, Ore., the requested premium is 16.2 percent higher than in 2015. But in Seattle, Wash, the requested premium is 10.1 percent less than in 2015.

If people are willing to switch, the effective rate increases are very low and below historical norms.  People who are determined to stick with their high cost insurer will get pounded on pricing.

All in all, this is one of the best articles on laying out the mechanics of pricing interactions for Exchange products that I’ve read in a while.  The reporter should be commended.

 

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11 replies
  1. 1
    Kristine says:

    Thanks for posting these explanations. They’re so helpful.

  2. 2
    Matt McIrvin says:

    We are only seeing the high increase outliers as the name and shame element of the PPACA rate regulation mechanism only comes into play when the increase request is more than 10%.

    Wow, this seems like a political own goal: in the political media, those increases won’t reflect on the insurer, they’ll get identified with Obamacare.

  3. 3
    wenchacha says:

    Thanks, Richard. People seem to lurrrrv the gloom and doom scenarios more than ones that tell us more Americans can get health care.

  4. 4
    Davis X. Machina says:

    This is a dead thread, so I might post this upstairs, too.

    Will people risk their health to make a party-political point?

    Apparently, yes….Michael Tesler at The Monkey Cage: “More Democrats are getting health insurance, thanks to Obamacare. Why are Republicans staying away?”

  5. 5
    Ted Mills says:

    On a side anecdote, my wife recently had to stay overnight in the hospital for tests (nothing serious), and she finally got the bill: she only owed $150. Thanks, Obama!

  6. 6
    jl says:

    thanks for a very useful post and links

  7. 7
    Roger Moore says:

    This seems like an extension of their billing practices. First, you ask for a totally unreasonable amount as a bargaining position, then negotiate down when people point out how unreasonable it is.

  8. 8
    Howard Beale IV says:

    Wrap your head/mind around this one.

    $83,000 for pharmacy charges to treat a poisonous snakebite victim?

  9. 9
    TriassicSands says:

    Many insurers selling plans in Pennsylvania are requesting only modest increases, and some are requesting decreases.

    This is one of the things that is terribly wrong with our health insurance system. People should have stability in their coverage — and they shouldn’t have to change doctors and/or clinics because of rate increases. The for-profit health insurance companies are going to constantly play games with rates trying to maximize their profits. Inertia plays a huge role in something like insurance coverage, so a company may low ball one year to attract people, figuring that they can raise the rates later and most people will stick with them, if only to avoid the hassle of change. It’s a lousy system.

  10. 10
    Richard Mayhew says:

    @TriassicSands: The biggest requested increase in Pennsylvania (Geissenger) is a non-profit. Costs have to be covered somehow… and if you want to argue that single payer would provide a shit ton more stability and remove a shit ton of useless verbiage, I’ll agree with you. But I’ll ask, how do we get there?

  11. 11

    […] may not be big anyway in dollars and cents. “Looking past the scary headlines” as Richard Mayhew of Balloon Juice suggests in Pennsylvania could make a huge difference in what the buyer pays in premiums. Many of […]

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