Are health insurers really losing huge sums of money on Affordable Care Act individual exchange plans, or are they simply playing hardball with insurance regulators and ACA exchange managers?
Some patients, employers, consumer groups and regulators still seem to assume that most health insurers are doing reasonably well, and that they could afford to keep their products on the ACA shelves in 2017 with just modest price increases.
The Connecticut Insurance Department, for example, organizes public hearings on big health insurance rate increases. When the department released its 2017 rate decisions late last week, it posted many comments from members of the public, and public officials, who are furious about the rate increases.
Richard Blumenthal, a Democratic U.S. senator, wrote to Katharine Wade, Connecticut’s insurance commissioner, asking that she, “aggressively review each rate filing, drill down on the assumptions behind the projected expenses and look for every opportunity to reduce, if not eliminate, the proposed rate increases.”
The commenters who look at the individual health insurance market from that perspective say that health insurers are just trying to bargain for better terms, or, possibly to get the Centers for Medicare & Medicaid Services and other federal agencies to soften positions on proposed acquisitions, Medicare plan programs, and other matters that have little or nothing to do with the ACA exchange system and the ordinary commercial health insurance market.
Even in 2014, when the ACA exchange system was popular with many health insurers, the level of exchange competition was disappointing in many markets, according to a new analysis from the U.S. Government Accountability Office.
Observers who are skeptical of health insurers’ complaints say insurers are simply using their size to jerk regulators around.
But credit analysts at New York-based Moody’s Investors Service say the problems with the ACA exchange system look like a threat to insurers’ well-being.
Insurers probably lost about $3 billion on ACA exchange business in 2014, and more in 2015, the analysts say.
“It is not clear what steps the Obama administration would take to salvage the individual commercial market,” Moody’s analysts write in a new commentary.
The Obama administration could try to create a government-run health insurer that would compete with private health insurers, or ban insurers that stay outside the exchange system from participating in the Medicare plan and managed Medicaid programs, the analysts say.
Those options “would have negative consequences for insurers,” the analysts say.
Insurers, meanwhile, are saying that they are having a hard time setting prices high enough to pay the claims they are getting.
Here’s a sampling of some of what insurers are saying, based on Connecticut department filings and filings posted by the Nebraska Department of Insurance, another regulator that has just completed 2017 rate reviews.
Enrollees still seem to be getting sicker, not healthier, carriers say. (Image: iStock)
1. Issuers in both Connecticut and Nebraska say the ratio of claims to premiums is very high.
Nebraska still has a shot at having plans from Hartford-based Aetna, Minneapolis-based Medica, and Lincoln, Nebraska-based BlueCross BlueShield of Nebraska on its exchange, which is operated by HealthCare.gov, in 2017.
The 2017 individual rate increases approved by Nebraska regulators average about 31 percent for Aetna, about 39 percent for Medica, and about 35 percent for Nebraska Blue.
The cheapest-to-insure hypothetical enrollee described, a 30-year-old in Omaha, Nebraska, will have to pay about $314 per month for Aetna coverage, about $494 per month for Medica coverage, and about $436 per month for Nebraska Blue coverage.
Connecticut, meanwhile, could still have plans from Indianapolis-based Anthem and Farmington, Connecticut-based ConnectiCare Benefits on its exchange in 2017, although it’s not yet certain that either carrier will sell coverage through Connecticut’s state-based exchange, Access Health CT.
Anthem originally asked Connecticut for increases ranging from 16.5 percent to 39.8 percent. Regulators told Anthem to recalculate its 2017 rates.
The only other issuer on track to sell individual coverage through Access Health CT, ConnectiCare, originally asked for increases ranging from 13 percent to 19.2 percent. The company later asked for increases ranging from 26.5 percent to 33.7 percent, after it saw how bad 2016 claims were.
The carriers say they have asked for big increases because 2015 claims were worse than they expected when they set 2015 rates, and 2016 claims have been worse than they expected when they set 2016 rates.
Nebraska Blue, for example, says its 2015 ratio of claims to premiums was has been about 105 percent, which is well above the ACA target of about 80 percent for individual and small-group business.
This year, the unadjusted medical loss ratio has increased to 108 percent, Nebraska Blue says.
“The poor experience demonstrates that a significant increase is justifiable,” according to an analysis by actuaries the Nebraska department hired to review the filing.
Last year, the company assumed enrollees would be 2.4 percent healthier in 2016 than in 2015, but the enrollees have actually been 4.4 percent sicker, according to the analysis.
Nebraska carriers say they expect to pay commissions to brokers in 2017. (Image: Thinkstock)
2. The remaining Connecticut exchange plan issuers might get rid of broker commissions.
Nebraska Blue says it expects to spend about 1.66 percent of premium revenue on commissions.
Medica expects to spend 1.48 percent of revenue, or $9.25 per enrollee per month, on commissions.
Aetna does not say how much it expects to spend on commissions in its filing.
In Connecticut, Anthem says it will pay commissions on off-exchange business, but not on exchange plan sales.
ConnectiCare says it will spend more on an internal sales program, but the cost of that program will eliminate its ability to pay commissions to outside sales brokers.
Connecticut rate reviewers say in a comment that they think the Connecticut exchange will pay broker commissions in 2017. An exchange representative said the exchange has not yet made a decision about what to do about commissions.
Rate filings in most states were due by June 15. (Image: Thinkstock)
3. Regulators in Connecticut and Nebraska are taking different approaches to rate filing deadlines.
The June 15 rate filing deadline was before many insurers had a full quarter of 2016 mature claims data to look at, and before the June 30 data release date for the Affordable Care Act reinsurance and risk-adjustment programs.
Nebraska regulators let insurers increase their 2017 rates over what was originally requested, to adjust, for example, for the departure of a large carrier from the market.
Connecticut regulators declined to let ConnectiCare adjust its rate filings in response to finding that 2016 claims were much higher than expected. ConnectiCare asked in August to increase its original premium increase requests by 14 percentage points. Connecticut regulators simply pointed the company to a filing rule stating that, “No changes will be accepted after June 15, 2016, unless specifically requested by the Insurance Department.”
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