Higher-than-anticipated costs a factor for some healthcare.gov plans
by Dave Ranney, KHI News Service
Two of the three companies that sell individual-market policies for Kansans on the federally administered health insurance marketplace are proposing significant premium increases for 2016.
Rate increases proposed by Blue Cross and Blue Shield of Kansas, the state’s largest insurer, range from 35 percent to 39 percent. Aetna and Coventry Health Company, which merged in 2013, requested rate increases of 20 percent to 35 percent.
The proposed increases were posted Monday on healthcare.gov, the exchange marketplace created as part of the Affordable Care Act. Plan rates are available by searching for ACA-compliant plans in Kansas that will be effective Jan. 1, 2016.
“Federal law requires the posting of any proposed health insurance increases of more than 10 percent,” Kansas Insurance Commissioner Ken Selzer said in a prepared statement, referring to a provision in the ACA that requires states to share the proposals with the public on or before June 1.
The proposals, Selzer said, are now subject to review and approval by the Kansas Insurance Department, which made an initial announcement about the increases last week.
“We will be working to find ways to keep consumer health insurance increases as low as possible and still allow the companies to offer required quality products and service,” he said.
Department officials have until Aug. 25 to rule on the proposed increases. Historically, adjustments in the proposed increases are not unusual.
The third company on the marketplace, Blue Cross and Blue Shield of Kansas City, proposed an individual-market increase of slightly less than 10 percent.
A national issue
News of the proposed increases surprised few of the exchange’s observers.
“We’re seeing the same sort of thing in a lot of other states,” said Sheldon Weisgrau, director of the Health Reform Resource Project in Kansas. “This is a reflection of what it actually costs to insure a large majority of population, whereas before what we had was a market that excluded a lot of people.”
Mary Beth Chambers, a spokesperson for Blue Cross and Blue Shield of Kansas, said the company’s proposals are driven by a need to offset higher-than-anticipated costs in 2014. That was the first year that the ACA required most U.S. citizens to have health insurance — and the first year that insurance companies could not deny coverage to people with pre-existing health conditions.
It also was the first year of operation for the online marketplaces, which were created as part of the federal health reform law to increase access to health insurance.
“Our 2014 claims experience was more adverse that what we had anticipated, and the same thing is going to be true for 2015,” Chambers said. “We are looking to adjust rates so that we’ll be able to collect enough in premiums to pay for the claims that we anticipate our members will need in 2016.”
The company’s overall costs last year, she said, exceeded its premium collections.
“In 2014, we absorbed about $74 million in underwriting losses,” Chambers said. “I don’t have a projection for 2015 yet, but we are projecting a loss for this year as well.”
Much of the shortfall, she said, is a consequence of the company having to predict the costs of providing coverage for the newly insured without having a full year’s worth of claims data.
“In April of 2014, we had to file our rates for 2015 with only three months of claims experience, and we were still taking on new members because the marketplace was still open,” Chambers said. “And here we are now, filing rates for 2016 that are based on just a year’s worth of claims in a marketplace that’s still evolving.”
She said people obtaining insurance through the marketplace required more services, had more chronic conditions and needed more high-price drugs than the company anticipated. In 2015, nearly 100,000 Kansans obtained insurance through the marketplace.
Rohan Hutchings, a spokesperson for Aetna and Coventry Health Company, said the company’s proposed increases “simply reflect the costs of health care, including the cost of services, the amount of services people will receive and an increase in pharmaceutical costs.”
Blue Cross and Blue Shield of Kansas City proposed an 11 percent increase for its small-group plans. Small-group increases proposed by Blue Cross and Blue Shield of Kansas and Aetna/Coventry fell below the 10 percent threshold.
Other factors can affect cost
If upheld, the increases will take effect Jan. 1. Open enrollment for the 2016 marketplace begins Nov. 1, 2015, and ends Jan. 31, 2016.
The proposed increases are averages. Actual increases will vary depending on beneficiaries’ age, family size, location and tobacco use.
The insurance department does not regulate premiums for large-group and self-insured plans.
For many beneficiaries, the increases will not be as onerous as they appear, according to Weisgrau.
“We’re hearing a lot nowadays about how premiums are increasing 30-plus percent,” he said. “But what’s not getting much coverage is that if you bought health insurance on the exchange, you probably got a tax credit that made the premiums affordable. That tax credit is still going to be there in 2016, so if your premium goes up, your tax credit is going to go up as well.”
Also, Weisgrau said, consumers have the option of buying less expensive plans on the exchange.
“There’s nothing that says you have to choose the same plan next year,” he said.
The Health Reform Resource Project is supported by several Kansas foundations, including the Kansas Health Foundation, the primary funder of the Kansas Health Institute, which is the parent organization of the editorially independent KHI News Service.
The nonprofit KHI News Service is an editorially independent initiative of the Kansas Health Institute and a partner in the Heartland Health Monitor reporting collaboration. All stories and photos may be republished at no cost with proper attribution and a link back to KHI.org when a story is reposted online.
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