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On the Third Hand: Grading 2017

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I interfered with the mental wellness of some readers Tuesday by publishing an article about an actuary who says it’s possible, based on what he’s seen in individual health rate filings, that typical 2017 premium increases might be in the range of the “high single digits to low double digits.”

To me, it seems as if that translates as “7 percent to 14 percent.” 

Rate proposal filings are due in the states and many other states May 11. States have posted just a smattering of 201 form and rate filings on line, and going through each state’s filing portal takes a long time. 

The actuary who sent me the “high single digits to low double digits” estimate, Dave Dillon, put in many, many disclaimers. But I wrote about his guesstimate because it’s the first one I’ve noticed that seems to be based on interactions with a large number of rate filings, as opposed to people’s personal politics, or solely on a general look at the individual health insurance rate picture.

Of course, on the one hand, it’s easy to imagine, based on how tough the big, publicly traded health insurers have been on agent and broker compensation, that typical rate increases will really be more in the 100 percent to 200 percent range than in the 7 percent to 14 percent range. Maybe what will hold the apparent magnitude of the increases down is that the issuers who would be asking for increases over 50 percent will withdraw their products from the market rather than face the bad publicity that might come with asking for 80 percent premium increases.

On the other hand, the 2015 individual health product menus looked a lot healthier than I expected, and health insurance actuaries seem busy. I don’t see floods of message board posts talking about how bored and under-employed health actuaries are. That might be a sign that a large number of actuaries are developing 2017 individual health rate filings.

The drafters of the Patient Protection and Affordable Care Act of 2010 (PPACA) wanted to make individual people healthier and happier, keep doctors and hospitals around to treat patients, keep health care costs from bankrupting the United States and its states, and keep insurers from strangling PPACA. wants insurance companies, agents and brokers to be happy, but the drafters of PPACA did not necessarily think of keeping insurers and producers alive as a priority. The drafters, to put it another way, just weren’t that into you.

So, on the third hand, before the form and rate filings pour out, what standards could a neutral observer use to determine whether the 2017 individual health rate filings are looking good or bad?

Here are some thoughts.

Whether the PPACA public health insurance exchange system survives and whether the guaranteed-issue individual health insurance market created by PPACA survives are related but separate matters. Whether a state’s residents can get individual health coverage somewhere, and whether they can somehow use PPACA premium subsidy tax credits to pay for the coverage, are much more important than whether residents get the coverage through a public exchange program.

Given that the 2017 rates are the first insurers will set with a full year of PPACA World claim experience data (for 2014) in hand, it’s reasonable to think that a typical insurer will have to add a big, ugly PPACA enrollee reality adjustment to 2017 rates. If the 2017 PPACA reality adjustment is under, say, 30 percentage points, and insurers are reasonably confident that any additional PPACA reality adjustment for 2018 will be close to zero, based on what they know about 2015 claims, the PPACA reality adjustment may not be that big of a deal. The adjustment may just force us to face the facts about what making decent, guaranteed-issue coverage available to sick people really costs.

If the typical U.S. resident can use PPACA tax credits to pay for PPACA-compliant individual health coverage in 2017 from one issuer, whether that’s through a public exchange or outside the exchange system, and the lowest available premium is less than 30 percent higher than the average 2016 premium, maybe that’s survivable.

If the PPACA individual health regulatory framework survives at all, a bigger test would come in 2018: If PPACA World enrollees are still so hard to understand that insurers have to add another big PPACA reality adjustment in 2018, that would suggest that PPACA-rule enrollees will always be a mystery. If, however, insurers can make pretty good predictions about PPACA-rule enrollees, the fact that they cost more to cover than old-rule enrollees would not be a problem with PPACA. PPACA is not a mechanism for controlling health coverage costs. It’s a tool for showing society what covering everyone costs, putting poor people and sick people in a safe room, and having other interest groups beat each other up with baseball bats over what to do next. Eliminating the PPACA framework would simply mean that poor people and sick people have to pick up bats and fight for themselves, just as they tried to do before Jan. 1, 2014.

The real alternative to the PPACA individual health framework may be Medicaid expansion, rather than a shift to a freer health insurance market. Even if Republicans end up controlling the White House and both branches of Congress in January 2017, it’s not clear that they will have much ability to move controversial PPACA change legislation through Congress. Expanding Medicaid programs may be politically easier than other strategies simply because PPACA exempts Medicaid programs from many of the benefits requirements that apply to commercial health coverage. Medicaid program managers may face less PPACA red tape than other payers do. 

See also:

PPACA revamp provision: Feds emphasize limits

Speakers Slam Patients’ Bill Of Rights


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