qotd: BCBS warns of higher premiums for 2016

Bloomberg BNA
Health Care Blog
May 14, 2015
Health Plans Poised to Ask for Higher Premiums for 2016, Blue Cross
Executive Warns
By Sara Hansard

Look for health plans to request higher rates for 2016, a Blue Cross and
Blue Shield Association (BCBSA) executive warned May 13.

Costs for health plans in 2014 were higher than expected due to fewer
young enrollees signing up for Affordable Care Act plans during the
first year that the major provisions of the law took effect requiring
people to have coverage or pay a fine, Kim Holland, BCBSA director for
state affairs, said at a conference on ACA health insurance exchanges.

That left health plans sold on the ACA exchanges with a high portion of
enrollees who had previously unmet medical needs, such as costly
transplants, Holland said. "Those plan costs were higher and those are
expected to play out in higher rates," she said. "We're starting to see
that now as plan filings are becoming public, and that is likely to
continue."

Moreover, she added, it's unlikely that plans will receive much of the
money they had expected from the ACA's risk corridors program, which was
intended to help cover insurers' losses in the event they ended up with
a sicker-than-average population. Too many plans had to cover high
medical bills, leaving too few plans to pay into the fund for the
program, she said.

Holland also warned that there are "unrealistic pressures" on insurers
to keep premiums down. "You cannot have every doctor in your network,
very low copays, broad benefits and lower costs. It just can't work that
way," she said.

http://www.bna.com/health-plans-poised-b17179926525/

Health Insurance Exchange Summit, May 11-13 2015, Washington, DC
Health Plan Strategic Response Roundtable, with Kim Holland (Video, fee
$59.95):
http://www.healthinsuranceexchangesummitportal.com/view_media.php?mid=122

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Quote of the Day
August 25, 2010
Affordable Care Act is wrong framework to fix adverse selection
Comment by Don McCanne

Any health care financing system that divides health care funds into
separate risk pools inevitably experiences adverse selection. In fact,
private insurers do all that they can to see that their own risk pools
contain low-cost healthier individuals while shifting higher-cost
individuals into other public or private risk pools.

Adverse selection was not simply an inconvenient policy problem that the
legislators had to fiddle with merely because they rejected the concept
of a single universal risk pool that eliminates the problem of adverse
selection. Far worse, it was a deliberate policy decision supported by
the leadership of the private insurance industry.

http://www.pnhp.org/news/2010/august/affordable-care-act-is-wrong-framework-to-fix-adverse-selection

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The Commonwealth Fund Blog
December 22, 2014
Analysis Finds No Nationwide Increase in Health Insurance Marketplace
Premiums

A new analysis of the Affordable Care Act's health insurance marketplace
costs finds that, nationwide, marketplace premiums did not increase at
all from 2014 to 2015, though there were substantial average premium
increases in some states and declines in others.

While average premiums nationwide did not change from 2014 to 2015,
there were wide differences across states.

The risk stabilization programs, which include risk adjustment, risk
corridors, and reinsurance, diminish insurers' risk of financial losses
and allow them to price their plans more aggressively.

An outstanding question, however, is the long-term sustainability of
current trends in premiums.

http://www.commonwealthfund.org/publications/blog/2014/dec/zero-inflation-nationwide-for-marketplace-premiums

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Comment by Don McCanne

Supporters of the Affordable Care Act (ACA) tout the fact that premiums
for plans offered in the ACA exchanges did not increase in the second
year, showing that ACA has been effective in slowing the cost of health
care. Yet Kim Holland, Blue Cross Blue Shield Association director for
state affairs, warns that private insurers will be requesting higher
rates for 2016. How can we explain this?

We warned long ago that ACA would not eliminate adverse selection - the
concentration into insurance risk pools of patients with more expensive
medical problems.

According to Kim Holland, "costs for health plans in 2014 were higher
than expected due to fewer young enrollees signing up for Affordable
Care Act plans," and "that left health plans sold on the ACA exchanges
with a high portion of enrollees who had previously unmet medical needs,
such as costly transplants." Although private insurers have been masters
at gaming adverse selection, they have now become victims of it.

A couple things happened to cause this. First, although HHS claims that
healthier, younger individuals did sign up in large numbers, the
insurers' numbers show that this enrollment was inadequate to dilute the
ACA risk pools. Another factor is that there was a surge in enrollees
who had major unmet medical needs requiring expensive procedures such as
joint replacements or organ transplants. In addition, the risk corridor
program set up to compensate for these greater losses appears to be
inadequate since the the profits in the risk pools insuring healthier
individuals were not large enough to offset the greater losses in the
more expensive pools.

If this is the case, then why didn't the premiums increase for 2015?
That's simple. The insurers had only a few months of experience with
their first year enrollees when they had to submit their premium
requests for 2015. So they had to rely primarily on claims experiences
prior to 2014. Now they are in the process of submitting their requests
for 2016, and they now have a full year's experience demonstrating that
costs actually were higher, at least partly due to adverse selection.

The Commonwealth Fund's report showing that premium increases for 2015
were insignificant should not have been interpreted as showing that
costs did not go up. Costs did go up, but the premiums were based
primarily on the same data used to establish premiums for 2014.

Five years into ACA we now have the right to be in a "we told you so"
mode. We were not prescient. Health policy science is advanced enough to
predict quite accurately the consequences of these policy decisions.
Just think of the multitude of other adverse consequences we have
predicted, and we have not been wrong yet.

We have also predicted the benefits of a properly designed single payer
national health program. We cannot see the results of such a program
here in the United States since we don't have a single payer system (and
Medicare is not single payer because it is only one player in an
administratively inefficient, fragmented system). But other nations do
have single payer systems, and their beneficial results were fully
predictable.

Ignore health policy science at your own risk, or maybe we should say at
the nation's risk.