Monday, July 6, 2015

qotd: What do the projected health insurance premium increases mean to us?

The New York Times
July 3, 2015
Health Insurance Companies Seek Big Rate Increases for 2016
By Robert Pear

Health insurance companies around the country are seeking rate increases
of 20 percent to 40 percent or more, saying their new customers under
the Affordable Care Act turned out to be sicker than expected. Federal
officials say they are determined to see that the requests are scaled back.

The rate requests, from some of the more popular health plans, suggest
that insurance markets are still adjusting to shock waves set off by the
Affordable Care Act.

It is far from certain how many of the rate increases will hold up on
review, or how much they might change. But already the proposals,
buttressed with reams of actuarial data, are fueling fierce debate about
the effectiveness of the health law.

A study of 11 cities in different states by the Kaiser Family Foundation
found that consumers would see relatively modest increases in premiums
if they were willing to switch plans. But if they switch plans,
consumers would have no guarantee that they can keep their doctors. And
to get low premiums, they sometimes need to accept a more limited choice
of doctors and hospitals.

Marinan R. Williams, chief executive of the Scott & White Health Plan in
Texas, which is seeking a 32 percent rate increase, said the requests
showed that "there was a real need for the Affordable Care Act."

"People are getting services they needed for a very long time," Ms.
Williams said. "There was a pent-up demand. Over the next three years, I
hope, rates will start to stabilize."

Sylvia Mathews Burwell, the secretary of health and human services, said
that federal subsidies would soften the impact of any rate increases. Of
the 10.2 million people who obtained coverage through federal and state
marketplaces this year, 85 percent receive subsidies in the form of tax
credits to help pay premiums.

In an interview, Ms. Burwell said consumers could also try to find less
expensive plans in the open enrollment period that begins in November.
"You have a marketplace where there is competition," she said, "and
people can shop for the plan that best meets their needs in terms of
quality and price."

In their submissions to federal and state regulators, insurers cite
several reasons for big rate increases. These include the needs of
consumers, some of whom were previously uninsured; the high cost of
specialty drugs; and a policy adopted by the Obama administration in
late 2013 that allowed some people to keep insurance that did not meet
new federal standards.

"Healthier people chose to keep their plans," said Amy L. Bowen, a
spokeswoman for the Geisinger Health Plan in Pennsylvania, and people
buying insurance on the exchange were therefore sicker than expected.
Geisinger, often praised as a national model of coordinated care, has
requested an increase of 40 percent in rates for its health maintenance

Federal officials have often highlighted a provision of the Affordable
Care Act that caps insurers' profits and requires them to spend at least
80 percent of premiums on medical care and related activities. "Because
of the Affordable Care Act," Mr. Obama told supporters in 2013,
"insurance companies have to spend at least 80 percent of every dollar
that you pay in premiums on your health care — not on overhead, not on
profits, but on you."

In financial statements filed with the government in the last two
months, some insurers said that their claims payments totaled not just
80 percent, but more than 100 percent of premiums. And that, they said,
is unsustainable.


Comment by Don McCanne

Although it will be about three months before we have the final health
insurance premiums for 2016, the information we have already can warrant
a few preliminary observations.

* The Affordable Care Act appears to have failed on delivering its
promise of controlling global health care costs. The primary reason
given by the insurers when submitting requests for much higher premiums
for 2016 is that health care costs were much higher than their actuaries

* Some complain that new enrollees were less healthy and thus drove
spending up, but under the individual mandate, increases in enrollment
were across the board and not concentrated amongst the less healthy.

* There may have been some pent up demand amongst new enrollees (e.g.,
joint replacement) but that is only a transient surge which does not
warrant long term premium increases. Much of the pent up demand will
have been ventilated as most of the remaining uninsured are ineligible
by immigration status or by personal hardship. The numbers who are
eligible but decline coverage will only trickle in as health care needs

* It appears that the increases in the benchmark silver plans will not
be as great as the increases currently receiving considerable publicity.
Requests over a ten percent increase were required to be made public
whereas increases under ten percent will not be known until plans are
marketed prior to the November 1 beginning of open enrollment.

* Because rate increases vary considerably amongst the plans, many
individuals will be forced to choose between paying higher rates by
staying in their current plans or changing to plans with lower rates but
with different narrow provider networks thereby potentially sacrificing
continuity of care.

* Respected institutions such as Geisinger in Pennsylvania and Scott
and White in Texas are asking staggering premium increases, indicating
that the supposed cost containment features of ACA are having a
negligible impact on legitimate spending.

* Little is being said about the insurance underwriting cycle. Large,
well capitalized insurers are able to price their products more
competitively, decreasing the market presence of less competitive
insurers. Once market dominance is established, insurers are free to
drive up premiums as much as 20 to 40 percent, as reported in this New
York Times article. The regulated medical loss ratios are generous
enough to allow market performance (profits) to excel, as confirmed by
current Wall Street activity in health insurance equities.

So are we going to wait until October when the premium rates are
announced, and then do nothing other than continue to stand back and
observe because the insurers will reassure us that silver benchmark
plans didn't go up that much - maybe 4.4 percent - even if it means that
the enrollees have to switch plans and find new providers in a different
narrow network? Is this the good that's coming out of all of this? What
about those who want to continue with their current providers, but face
a 20 to 40 percent premium increase? Will the death spiral bleed over
from insurers to patients?

Enough. Single payer.

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