Obamacare premiums will cause a firestorm at the polls in
2016! Rate increases will cause so many Americans to drop their Obamacare
coverage, and those that have yet to sign-up (There is already low penetration
that is well well well lower than the 75% needed) will be priced out of the
healthcare market. Many Americans are going to be much worse off than they were
prior to Obama breaking the American Healthcare system! Was it perfect? Hell
no! But….If the Federal Government would have just bought every uninsured
American a solid plan instead of wasting all this money on the Obamacare
infrastructure America would not have this huge mess! Just saying!
JUN 10, 2015 @ 12:57 PM
GUEST POST WRITTEN BY
Robert Laszewski
Mr. Laszewski is the president of Health Policy and Strategy
Associates, LLC, a policy consulting firm based in Washington, D.C.
Why
Are The 2016 Obamacare Rate Increases So Large?
You might recall that
I have said we wouldn’t see the real Obamacare rates until the 2017 prices are
published in mid-2016. By then health plans will finally have had a couple of
years of credible claim data and two of the three “3 Rs” reinsurance provisions
subsidizing the insurance companies will have gone away.
I
have also made the argument that after two years the Obamacare enrollment of what it needs for us to be assured
that we have a sustainable risk pool—enough healthy people signed up to pay the
costs for the sick.
Instead of
moderate rate increases for one more year, the big rate increases have begun.
They are particularly large among the health insurers with the most
enrollment—the carriers with the most data.
Texas Blue Cross
stands out. The health plan commented in its federal government rate filings
that it covered 730,833 Obamacare individuals in 2014 with premium of $2.1
billion and claims totaling $2.5 billion––for a medical loss ratio of 119%. The
plan further commented that, after the “3Rs” reinsurance adjustments, they lost
17% to 20% of premium in 2014–that would be about $400 million. And, they are
only asking for a 20% rate increase.
While
we won’t see all of the rates in all of the states for a few months, some state
regulators have begun to make the 2016 rate actions public:
• CareFirst Blue Cross
of Maryland is asking for a 34% rate increase on its PPO plan and a 26.7% rate
increase for its HMO. CareFirst has an 80% market share in the Obamacare
exchange and only 30% of the eligible Maryland market has signed up on the
exchange.
• In Oregon, where less
than 35% of the eligible have signed up on the exchange, the biggest insurer
with 52% of the market, Moda, has asked for a 25.6% increase. Lifewise, with a
19% market share, has asked for a 38.5% increase.
• Blue Cross Blue
Shield of Tennessee, with a 165,000 members making up 70% of the Obamacare
exchange is asking for a 36.3% increase. The second biggest player, Humana HUM +1.14%,
is asking for a 15.8% increase. Less than 40% of the eligible exchange market
signed up in Tennessee.
• Georgia is the second
biggest Obamacare market for Humana, having enrolled 254,000 people out of a
total market of 479,000, and Georgia “maybe. Its CEO has said about Georgia,
“We can’t have one business being subsidized by another business.” Humana is
asking for 2016 individual plan rate increases from 14.8% to 19.44%.
• In Iowa, with the
lowest enrollment rates in the country, and where its biggest Obamacare insurer
went broke last December, Wellmark Blue Cross, which only sells off the
exchange, is asking for a 43% increase on its Obamacare compliant policies.
Coventry, which has 47,000 Obamacare customers, is asking for an 18% increase
for its on-exchange business.
• The Kansas insurance
department has not made its rate increases public yet but has said that plans
will increase by as much as 38%. Less than 40% of the eligible have so far
enrolled.
• Pennsylvania is not
encouraging with market leader Highmark asking for increases ranging from 13.5%
to 39.65% and the Geisinger HMO asking for increases from 40.6% to 58.4%.
Pennsylvania enrolled 50% of the potential exchange market in 2015.
But the rate
increases so far are also a mixed bag:
• In Washington State,
where only 30% of the market signed up, the biggest player, Primera Blue Cross
is asking for a 9.6% increase. But most of the other big plans are withdrawing
their old plans and replacing them with new designs: Coordinated Care with 13%
share, Lifewise 17% share, and Regence 16% share. When a carrier retools its
offerings it is generally a sign of needing to go back to the drawing board.
Requested rate changes for other existing plans range from -10.86% to +19.3%.
• In Connecticut, where
45% of the market signed up, the biggest insurer on the exchange, Anthem WLP +% with a 33% share, has asked for a 6.7%
increase and the second biggest carrier, Connecticare, has asked for a 2%
increase for its on exchange plans. Other increases range from +5.2% to +33%.
• In Michigan, where
45% of the market signed up, the biggest Blue plan with 65% market share is
asking for a 9.7% increase on one of its plans and an 11.3% increase on the
other. Other increases range from -12.6% to +42.2%.
• In Vermont, the state
with the highest market penetration for the Obamacare exchange with 75% signing
up, the dominant Blues plan is asking for increases averaging 8.3% and ranging
from +4.7% to +14.3%.
There
will be lots more big rate increases coming. For two months we’ve been hearing
warnings out in the market that this is going to be widespread. It is also
important to note that none of these insurers knew what increases their
competitors were going to submit when they prepared their rate actions. What
would some of these smaller players have done if they had known in advance the
big players with the most data and experience were giving such large increases?
Some might argue
these increases are not such a big deal because those being subsidized by the
government have their out-of-pocket premiums capped as a percentage of their
incomes no matter what the insurance costs. That these people apparently think
this bigger price will be paid by the health insurance subsidy fairy aside, it
will be important to remember that deductibles and co-pays also rise in
relation to costs. When the new plans become public expect to see bigger
deductibles and co-pays as well for 2016. The average individual baseline Silver
Plan deductible was almost $3,000 last year.
Like
last year, others will argue that these rate increases still have to be
approved in some of the states. But unlike last year, the carriers now have
hard data to show the insurance regulators. Some states will bring political
pressure to bear on these increases. But a 35% increase is not suddenly going
to become a 5% increase. There is obviously an overall claim cost problem here
and regulation can sometimes push it off but it can’t make it go away.
Others
will point out that people only have to switch plans to keep their costs in
line since there are some carriers asking for a lot less. That’s right. But the
fact that it is the big market share players that are often asking for the big
increases says something important about where these cheaper plans will be next
year. The big guys know something.
You just can’t look at this data and come away with a conclusion other than the
big cost increases driven by too few people signing up has started. And it has
started a year earlier than most of us expected.
Why are rates all
over the place? There are a number of reasons.
The number of people signing up
for Obamacare has varied considerably by state and is far below the level of penetration the
industry typically needs to create a sustainable risk pool
State sign-ups have
varied with Vermont signing up 75% of the exchange eligible and Iowa only
signing up 20%––insurers typically want to see 75% sign-up. Will the third open
enrollment next year turn things around? This year’s results were not
encouraging with the states having the best first year enrollment stalling out
in 2015––California, Washington and New York.
If
this pattern of one good year of state enrollment followed by a flat enrollment
continues, it is hard to see how Obamacare can reach a sustainable enrollment
level.
Many, but not all, carriers are
worried that the Obama administration is not going to follow through on its
promises to pay off most of a carrier’s losses through the “3Rs” reinsurance
program and decided not to wait another year before hiking the rates
In
December’s budget deal, the Congress insisted that the third element of the
program—the risk corridors—be revenue neutral after the administration last
year promised it would not be capped. S&P recently reported that, “The ACA
risk corridor will not receive adequate monies from insurers with profitable
exchange business to pay insurers that have unprofitable exchange business.”
And
in 2016, the second element of the “3Rs,” the claim reinsurance element, will
see the point over which the government helps pay the claim rise from a $45,000
claim to a $90,000 claim.
Then
there is the permanent and revenue neutral risk adjustor element of the
program. Health insurers with the worst claims experience end up getting
subsidized by the ones with the best experience. The problem is that the
government won’t do this calculation on the last year’s business until after
the health plans have to submit the next year’s rates making next year’s rate
calculation dicey at best.
This is not an exact science
Over
the years, it has been common to see one insurance company in the same market
dramatically price its business differently than another. Some have more data,
some are more patient, some are willing to underprice to grab more market
share, some have more experience in this market niche, and some just screw it
up. Over time, a few years, they all eventually get to about the same place but
with lots of variation along the way.
Health
plans are still dealing with incomplete data. Really, they are looking at just
one year of claims experience (early 2014 to early 2015) for a brand new book
of business in which the enrollment has not been stable.
What
has concerned many actuaries is how the market penetration for Obamacare slowed
considerably in year two in the states with the best first year enrollment
results. And, almost all of the states recorded a second year growth rate of
10% to 20%. A 20% growth rate might sound good, but to hit the original
Obamacare enrollment targets in this first three-year ramp-up, we needed to see
enrollment almost double. Obamacare enrollment just plain looks to be stalling
out just about everywhere below satisfactory levels and that is a very bad omen
for insurer bottom line results.
These rates assume the King v.
Burwell Supreme Court challenge to the premium subsidies in the states using
the federally run exchange will be unsuccessful
If
the Court eliminates the subsidies in at least 34 states, the health plans will
submit new and much higher rates in those states.
