Featured Health Business Daily Story, May 22, 2014
INSIDE HEALTH INSURANCE EXCHANGES provides news and strategic insights on the development and operation of public and private exchanges.
Rate hikes for coverage sold through exchanges are inevitable, but they could wind up being lower than anticipated, according to the preliminary filings that are beginning to trickle out from state insurance departments.
In Washington state, the average proposed rate change for the individual policies sold through the exchange is 8.25% — the lowest average rate increase in seven years, according to information released May 13 by the Office of the Insurance Commissioner.
Molina Healthcare Inc., which is selling coverage through nine public exchanges, proposed a 6.8% rate reduction for the 2015 plan year. But Molina, a publicly traded Medicaid managed care company that was new to commercial coverage, had some of the most expensive premiums on the state’s exchange, and enrolled just 1,200 members for the 2014 plan year out of 164,062 individuals who signed up for private coverage through the state’s exchange.
“Molina is dropping its rates by 6.8%, but it was one of the highest priced plans while the Group Health [Cooperative] is raising its rates by 11.2% after being one of the lowest priced plans. The takeaway is prices are normalizing as we would expect to see in any kind of competitive market,” says Matt Graham, a project manager for the exchange team at the consulting firm Leavitt Partners.
In Virginia, proposed rate hikes range from 3.3% for Kaiser Foundation Health Plan of the Mid-Atlantic States, which covers around 10,000 Virginia residents, to 14.9% for CareFirst BlueChoice, which covers around 32,000 people in the state, The Wall Street Journal reported May 13.
Industry consultant Robert Laszewski, president of Health Policy and Strategy Associates, LLC, cautions against reading too much into the proposed rates.
“Some carriers will go up quite a bit and some will go down quite a bit, having more to do with carriers narrowing their rates around the competitive baseline,” he tells HEX. “This means nothing. No carrier has any meaningful [claims] data yet.” He predicts rate increases for 2015 will average about 10%.
Given the newness of the new exchange marketplace and limited information about the likely risk pool, setting rates for 2014 “was kind of a crapshoot,” says prominent health reform expert Tim Jost, a Washington and Lee University law professor who serves as a consumer advocate at the National Association of Insurance Commissioners. He says some states had more price variation than others, but adds that it’s not surprising that some products were overpriced.
“To stay in the game, those prices will have to come down,” he tells HEX.
If approved, Washington’s state-run exchange will have more participating insurance carriers in 2015 and more products compared with the current plan year. For 2015, 12 health plan operators collectively filed 114 individual policies for sale within the Washington Healthplanfinder exchange.
Eight carriers now participate on the exchange. Three carriers — United Healthcare of Washington, Inc., Columbia United Providers and Health Alliance Northwest Health Plan, Inc. — didn’t participate in the exchange this year. Moreover, 10 insurers filed 119 individual health plans for sale outside of the exchange, boosting the potential number of non-exchange plans from 51 to 119.
In a prepared statement, Insurance Commissioner Mike Kreidler (D) noted that the rates are “far from final.” Given the limited experience with rate setting with public exchanges, the proposed rates would be carefully scrutinized, he said.
Two industry experts will provide a detailed analysis of what to expect — this year and next — in both the individual and small-business exchanges during AIS’s May 28 Webinar, Public Exchange Enrollment-Mix and Claims Results: Implications for 2014 Performance and 2015 Planning. Click here for more information and to register.
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