Health Net: Early 2014 claims look ugly

In a new 2015 individual coverage rate filing, which was submitted Oct. 2 and seeks an average rate increase of 10.8 percent, Health Net said it expects the extra health risk, or morbidity risk, resulting from the PPACA underwriting changes to increase costs greatly. The company said it once had a risk level below the state average, and will end up with a risk level above the state average. The morbidity shift will be enough to justify increasing individual costs 78.9 percent, the company said.

The company itself and state officials have noted that other factors, such as the new PPACA reinsurance program and the PPACA risk corridors program, should help offset much of the effects of the increase in morbidity. Insurance company have noted, however, that the PPACA risk programs are new, and that they’re not entirely certain how the programs will work.

Meanwhile, in Iowa, Time Insurance Company — a unit of Assurant Inc. (NYSE:AIX) — has given an estimate of the impact of state and federal PPACA “grandmothering” rules in a 2015 rate filing for individual off-exchange products.

“Grandfathering rules” have let consumers and small employers keep medical coverage that was in place in March 2010, when PPACA was signed into law, even if the coverage does not comply with most PPACA provisions.

The newer “grandmothering” rules have let consumers and small employers keep some coverage that was in place before Jan. 1, 2014, even if the coverage does not comply with all of the many major PPACA provisions that took effect Jan. 1, 2014.

Time estimates its individual policy morbidity would have increased 13.4 percent by 2015 if grandmothering had not occurred. The company is estimating that, because grandmothering affected when people with older individual coverage will start buying PPACA-compliant plans, the extensions of the old, grandmothered policies will increase 2015 morbidity levels by 23.5 percent over pre-PPACA levels.