Health Plans Poised to Ask for Higher Premiums for 2016, Blue Cross Executive Warns

By Sara Hansard
Bloomberg BNA, Health Care Blog, May 14, 2015

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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Affordable Care Act is wrong framework to fix adverse selection

Quote of the Day, August 25, 2010

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-framew…

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Analysis Finds No Nationwide Increase in Health Insurance Marketplace Premiums

The Commonwealth Fund Blog, December 22, 2014

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-inflatio…

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.