Thursday, June 19, 2014
The Wall Street Journal
June 18, 2014
Premiums Rise at Big Insurers, Fall at Small Rivals Under Health Law
By Louise Radnofsky
Hundreds of thousands of consumers nationwide who bought insurance plans
under the Affordable Care Act will face a choice this fall: swallow
higher premiums to stay in their plan, or save money by switching.
That is the picture emerging from proposed 2015 insurance rates in the
10 states that have completed their filings, which stretch from Rhode
Island to Washington state. In all but one of them, the largest health
insurer in the state is proposing to increase premiums between 8.5% and
22.8% for next year, according to a Wall Street Journal review of the
filings. That percentage represents the average rate increases for all
individual health plans offered by that carrier.
At the same time, insurers with the smallest enrollments are proposing
to cut rates so they can lure customers as the cheapest plans in their
The rate proposals reflect a combination of big carriers stepping back
from initial aggressive pricing, rising medical costs and increased
competition during the second year of President Barack Obama's health law.
With dominant market share now, analysts say, carriers feel they have
room to raise rates. Nine of the carriers are proposing average
increases for 2015 that range from 8.5% by Anthem Inc. in Virginia to
22.8% from CareFirst for its BlueChoice plans in Maryland. Most of these
large carriers' proposed rate increases hover around 10%.
Erin Shields Britt, a spokeswoman for the Department of Health and Human
Services, said the new exchange system "drives competition among plans,
requiring issuers to be more conscious of how they stack up to their
competitors, which is a trend we are already seeing accelerate in a
number of states, with new plans entering the market."
June 11, 2014
Aetna CEO says 2015 Obamacare rates increase less than 20 pct
By Caroline Humer
Health insurer Aetna Inc is submitting premium rates to regulators for
2015 Obamacare insurance plans that generally increase less than 20
percent from 2014, Chief Executive Officer Mark Bertolini said on Wednesday.
Bertolini said that customers are disenrolling from exchange plans on a
regular basis but that the company still expects to have 450,000
exchange customers at year end. He said that while he did not know the
reason for these customers leaving, he suspected that it was due to the
out-of-pocket costs before members reach their deductibles.
Comment by Don McCanne
Because of uncertainty of claims experience and instability in
enrollment, it is difficult for insurers to set their 2015 premiums to
match market conditions. But what is projected so far is that the
dominant insurers intend to raise their premiums about 10 percent,
ranging between 8.5 and 22.8 percent, according to this WSJ report.
Aetna's Mark Bertolini assures us that increases will be "less than 20
percent." What a relief.
Our Department of Health and Human Services is thoroughly sold on the
concept of using markets to price insurance products. As their
spokeswoman, Erin Britt, says, the new exchange system "drives
competition among plans, requiring issuers to be more conscious of how
they stack up to their competitors." Let's look a little bit closer at
what this market competition means.
The insurance underwriting cycle is a phenomenon in which insurers enter
the market with low premiums in an effort to gain a larger share of the
market. Once they have that share, they increase their premiums to the
maximum tolerated. In the meantime, competitors with a smaller share of
the market lower their premiums in an attempt to increase their share.
Because their premiums are too low and their volume is too small, they
fail and shut down. That leaves the dominant insurers in a position to
charge even higher premiums than their costs would warrant.
Patient/consumers end up being the losers.
That is precisely what is happening now, according to this report. The
dominant insurers are raising their rates significantly (but "under
20%") and "insurers with the smallest enrollments are proposing to cut
rates so they can lure customers as the cheapest plans in their markets."
These sick market dynamics are part of the reason that we have the least
effective health care financing system in the world. Nobel laureate
Kenneth Arrow explained to us decades ago why markets do not work in
health care. While it is true that they do not work for the
patient/consumer, market distortions work very well in moving our
financial resources into the hands of those controlling the markets.
Mark Bertolini, who is keeping Aetna's premium increases below 20
percent, for 2013 received an executive compensation of $30,712,565.
Works pretty well for him. In the meantime, we have an administration
that is willing to waive the penalties for not being uninsured for 23
million people to whom they are granting hardship exemptions. Those 23
million have to suffer because we dare not interfere with the dynamics
of market competition between health insurers.
Each day I write these comments, this is the point at which my blood
pressure goes up and I have to restrain myself from using inappropriate
language. I don't know how much longer I can do that. Using the
democratic process, we need to take over our government by electing
representatives who serve us, the people, rather than serving those
whose "r" is greater than our "g."
At the following link, Paul Krugman explains Thomas Piketty's r>g. It is
very wonkish, but skim on through to the end and you'll get the point.
at 12:35 PM