WASHINGTON – With the 2014 enrollment for individual marketplace coverage under the health care law now in the books, consumers, stakeholders and insurers have turned their attention to the cost of coverage in 2015.
While next year's sign-up period doesn't begin until Nov. 15, most marketplace insurers will submit their 2015 rate proposals to state and federal regulators in coming weeks, using just a few months of medical claims from new enrollees as their guide.
It's a bit of a guessing game, but they're accustomed to it.
"Much of the uncertainty that insurers faced when developing their rates for 2014 still exists," said Cori Uccello, senior health fellow at the American Academy of Actuaries. "Although insurers will have some information regarding the risk profile of their 2014 enrollees, such as their distribution by age and gender, available health status information is still very limited."
This year, the national average price for a marketplace "benchmark" health plan – an area's second-lowest-priced, or "silver," plan, which covers 70 percent of medical costs – was $3,800, according to the nonpartisan Congressional Budget Office.
Of the 8 million marketplace enrollees this year, 85 percent received financial assistance to help cover the cost of coverage and 65 percent selected silver plans.
Next year, the CBO expects the average price for a benchmark plan to increase by $100, but rates will vary by state and the geographic regions within them. In Arizona, Indiana, Virginia and Washington state, insurers have already submitted rate proposals, with most seeking premium hikes.
Some larger carriers in Washington state and Indiana have asked for rate hikes of 8 to 10 percent, while others are seeking double-digit increases, said Gary Claxton, a vice president at the Kaiser Family Foundation, a nonpartisan health-policy research group.
Others, such as Molina Healthcare Inc. in Washington state and Arizona's Meritus Health Partners, a private, nonprofit co-op, have asked for premium reductions next year after apparently overpricing their products this year.
Most states won't finalize their rates until later this summer and early fall after a series of negotiations with insurers. The Affordable Care Act requires that state insurance commissioners or the federal government review rate increases of more than 10 percent in the individual and small group market.
Claxton said he expected most rate increases to be under 10 percent with higher increases in rural areas that had fewer insurers and fewer health care providers, which made it harder to negotiate lower rates for care.
States with low marketplace enrollment, such as West Virginia, New Mexico and Mississippi, are also more vulnerable to higher rate increases because they'll have smaller risk pools with higher rates of sicker people, who were more likely to enroll early on.
"That means there's a lot of people left to enroll, which is a good thing, but it's not clear how insurers will view that," Claxton said. "They might worry that whatever factors made it difficult to enroll people in the first place will carry over."
The prospect of large rate increases is equally worrisome in the 24 states that accepted President Barack Obama's offer to extend older individual health policies until 2016 or 2017 even though they don't comply with the health care law's consumer protections and coverage requirements.
Because these policies required applicants to provide detailed health information, which was outlawed by Affordable Care Act, they're more likely to be healthy. But keeping their noncompliant policies excludes them from the statewide risk pools of people who purchased individual coverage on or off the marketplace.
The risk pools in these 24 states need these healthy people, who are cheaper to insure, to help offset the cost of sicker, more costly plan members. Without them, these states might experience rate hikes next year that are 10 percent larger than those in other states, said John Bertko, a retired senior actuary for the Centers for Medicare and Medicaid Services.
"Not all of them will, because every state's a little bit different," Bertko said. "It all depends on the amount of enrollment they got during the open enrollment period."
Bertko said the new hepatitis C drug cocktail, Sovaldi, might lead insurance premiums to rise up to 1.5 percent all by itself. Manufactured by Gilead, a top maker of AIDS drugs, Sovaldi has been shown to cure hepatitis C. But at $1,000 a pill, a 12-week course could run $84,000, he said.
While narrow provider networks and higher out-of-pocket costs helped keep marketplace insurance rates down this year, health care blogger Robert Laszewski is projecting rate increases that average about 10 percent next year.
But John Holahan of the Urban Institute thinks that market competition, another cost-moderating factor, will only increase next year as large insurers such as United Healthcare and other new entrants move into insurance marketplaces around the country.
In a new analysis on prospective 2015 premiums, Holahan wrote: "While there may be reasons to believe that premiums will increase substantially, particularly in less competitive markets, there are even stronger reasons to believe that premium increases will be moderate (in line with underlying cost growth) rather than growing by double digits."
Holahan's analysis suggests that the threat of lost market share due to higher prices will continue to keep premiums under control in 2015.
But Bertko said some new market entrants "may not be as competitive on unit price as some of the state (Blue Cross) plans and original players," who offered marketplace coverage this year. "So they could have relatively little effect on the prices."
While all these factors will affect premiums next year, none are individually determinative, Claxton advised.
"You can have an aggressive regulator that might say, 'You're only getting a 6 percent (increase) because that's all you need,' " he said. "That's why you can't really predict these things all that well."
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