Newsflash! Health insurance premiums are going up! Before you decide this is not really news, consider the size of the increases being requested.
These are just a few of the rate increases insurers are seeking for 2016:
- New Mexico – Health Care Service Corp. – asking for an average jump of 51.6%
- Tennessee – BlueCross BlueShield of Tennessee requested an average increase of 36.3%
- Maryland – CareFirst BlueCross BlueShield wants to raise rates 30.4% across its products.
- Oregon – Moda Health seeks an average increase of about 25%.
All of these insurers cite high medical costs incurred by people newly enrolled under ObamaCare.
Louise Radnofsky, writing for The Wall Street Journal, says these are just rate increase proposals at this time. Insurance regulators in many states can force insurance carriers to reduce these rates if unjustified. The federal government under ObamaCare can ask for explanations of any increase over 10%, but they cannot force them to cut rates.
Insurers say these proposed rates reflect the revenue needed to pay claims now that they have one year’s experience with ObamaCare. Rate increases for 2015 had to be made with less than a year’s experience since the law’s full implementation didn’t begin until the end of the first open enrollment in April, 2014.
“This year, health plans have a full year of claims data to understand the health needs of the exchange population, and these enrollees are generally older and often managing multiple chronic conditions,” said Clare Krusing, a spokeswoman for America’s Health Insurance Plans, an industry group. “Premiums reflect the rising cost of providing care to individuals and families, and the explosion in prescription and specialty drug prices is a significant factor.”
To be sure, not all states are seeing rate increase proposals this high. In Virginia, Anthem, Inc. wants an average increase of 13.2%. In Michigan, BlueCross BlueShield applied for an average 10% increase. In Washington and Vermont, market leaders are proposing more modest increases of 9.6% and 8.4%, respectively.
Robert Laszewski, insurance industry consultant, writes a healthcare blog that follows closely insurance rates. He says that many will argue, as the White House has already done, that these rate increases are subject to regulatory approval and can be rolled back. But he notes this year the health plans have hard claims data to show the regulators and a 35% rate increase is hardly going to be rolled back to 5%.
Furthermore, he notes the list of companies with high rate increases includes the big market share players, such as the Blues plans and these are the players with the best claims data.
The Future Could Be Worse
Laszewski says these higher rates are coming a year earlier than expected. Last fall he said 2015 rates would be artificially lower than expected since the insurance industry was protected by the “3 Rs” of risk adjustment, reinsurance, and risk corridors in Section 1342 of The Affordable Care Act. These bailout provisions of the law will protect insurers from any losses through 2016.
So it is alarming that we’re seeing such large rate increases already for 2016 because the real rate shock, predicts Laszewski, will come in 2017. That’s because the expiration of the “3 Rs” will mean insurers are on their own without the taxpayers there to bail them out. These 2016 rates may then seem modest.
The real cost of insurance that forces carriers to cover everyone regardless of pre-existing medical conditions, at the same rates, and to provide “essential health benefits” to all policies, regardless of need, will then be felt by consumers. By then it will be clear that the “Affordable Care Act” is not really affordable at all.