Typical individual major medical prices might go up faster than overall inflation in 2016, and a lot less than some early horror stories have suggested.
Around this time last year, opponents of the Patient Protection and Affordable Care Act (PPACA) public exchange system were predicting that exchange users would face huge rate increases.
In the real world, average requests were smaller than the doom seers reported, regulators forced issuers to reduce many of the requests, and consumers could hold the prices they actually paid down by shifting to different, cheaper plans.
One major difference is that insurers were still relying on incomplete 2014 PPACA system experience data to price their 2015 coverage.
This year, insurers have a strong incentive to wait, if necessary, to test their 2016 pricing assumptions against a full year of 2014 data and as much 2015 data as possible.
Insurers also have an incentive to do whatever they can to put off locking in 2016 prices until after they know about the fate of major external forces that could reshape the 2016 health insurance market.
Here’s a look at the latest thinking (and uncertainty) about 2016 premiums, based on in-depth analyses of the available rate filing data from Jesse Geneson and Kev Coleman of HealthPocket and Caroline Pearson of Avalere Health.
1. Plenty of insurers have filed applications to sell individual major medical products in 2016, and the typical increase requested is under 10 percent.
The Patient Protection and Affordable Care Act (PPACA) requires health insurers to justify requests for large, potentially “unreasonable” individual and small-group major medical rate increases, and it lets states give themselves the authority to change and reject increase applications.
The U.S. Department of Health and Human Services (HHS) oversees rate reviews for some states. In other states, it is state regulators who handle rate reviews.
HHS requires issuers seeking increases over 10 percent to post explanations. Some states let members of the public see all health rate applications, whether an insurer is asking for a rate increase, a rate decrease or no change.
Originally, the Center for Consumer Information & Insurance Oversight (CCIIO), the HHS division that runs HHS PPACA programs that affect the commercial health insurance market, looked as if it were going to require all issuers of 2016 major medical coverage to have explanations of requests for increase over 10 percent ready for publication by May 15. CCIIO later said that the May 15 deadline applied only to insurers in states in which HHS is handling the rate reviews.
At this point, CCIIO has published rate increase request information for about 3,800 of 2016 individual major medical plans from about 150 issuers, including most of the issuers proposing double-digit increases in the states in which HHS rate reviews and most of the issuers proposing double-digit increases in states with state-based review programs that have fed data into the CCIIO RateReview.HealthCare.gov system.
The overall U.S. Consumer Price Index (CPI) inflation rate for the 12-month period ending in April was negative 0.2 percent, and the annual inflation rate for 2014 was 1.6 percent.
Some insurers have made headlines by asking for 2016 individual rate increases of 40 percent or more.
But the HealthPocket analysts, who say they have data for a total of 45 states, say they believe, based on the partial data available, that issuers have filed 2016 rate requests that would increase rates an average of 12 percent in 2016, with rates increasing an average of 6 percent for high-value platinum plans, 9 percent for low-value bronze plans, 16 percent for gold plans, and 14 percent for silver plans.
Silver plan prices are important, because the Patient Protection and Affordable Care Act of 2010 (PPACA) pegs premium tax credit subsidy levels and cost-sharing reduction subsidy levels to the cost of the second cheapest silver-level plan in a market.
Caroline Pearson, the Avalere analyst, studied eight states that have released all 2016 health rate filing data and reports that, in those states, the cost of the average silver plan will increase just 5.8 percent. The cost of the benchmark plan, the second cheapest silver plan, will rise just 1 percent.
The filings suggest that consumers who are willing to change plans may be able to hold the premiums they actually pay for silver plans in 2016 to roughly the same price they are paying in 2015.
See also: CMS posts 2016 health rate filings
2. In the individual major medical market, platinum may be an endangered metal level.
The cost of platinum plans, which pay 90 percent of the actuarial value of the PPACA essential health benefits package, may be rising only 6 percent, but fewer than 3 percent of the consumers who used the PPACA exchange system to get covered bought platinum plans, according to HealthPocket.
But HealthPocket did not provide data on platinum plan selection rates for purchases of PPACA-compliant coverage in the off-exchange market.
3. The rate information supply is still terrible.
Health rate watchers have complete rate filing data for only eight states, and units of Assurant Inc. (NYSE:AIZ), a company that is withdrawing from the individual and insured small-group markets in 2016, submitted many of those filings.
Another challenge is insurers that have submitted filings can still ask for permission to adjust rates, or decide to withdraw from the market.
Actuaries for some carriers have noted in filing documents that they cannot know how the Supreme Court ruling on the King vs. Burwell PPACA premium subsidy case might affect the adequacy of the proposed 2016 rates.
In Michigan, for example, Jimmy Smith, an actuary for Blue Cross Blue Shield of Michigan, writes in the carrier’s 2016 rate filing that the company had to reply “no” to some of the required rate attestation questions.
The company answered that way “solely because of its concerns that a ruling by the Supreme Court that premium subsidies are unavailable in federal facilitated marketplace…states like Michigan would invalidate actuarial assumptions made in [Michigan Blue's] rate filing, and that such a ruling would result in there being fewer enrollees in the individual market and therefore a smaller pool over which risk can be spread, and that those remaining individual market enrollees would have significantly higher average health care costs,” Smith writes.
As a result, Smith writes, premiums for 2016 “are unlikely to be inadequate to cover claims” if the court rules against the subsidies.