Wall Street Journal
Tens of thousands of consumers nationwide who bought insurance plans under the Affordable Care Act could face a tough choice this fall: swallow higher premiums to stay in their plan, or save money by switching? WSJ's Louise Radnofsky joins Simon Constable to discuss.
Hundreds of thousands of consumers nationwide who bought insurance plans under the Affordable Care Act will face a choice this fall: swallow higher premiums to stay in their plan, or save money by switching.
That is the picture emerging from proposed 2015 insurance rates in the 10 states that have completed their filings, which stretch from Rhode Island to Washington state. In all but one of them, the largest health insurer in the state is proposing to increase premiums between 8.5% and 22.8% for next year, according to a Wall Street Journal review of the filings. That percentage represents the average rate increases for all individual health plans offered by that carrier.
At the same time, insurers with the smallest enrollments are proposing to cut rates so they can lure customers as the cheapest plans in their markets.
The rate proposals reflect a combination of big carriers stepping back from initial aggressive pricing, rising medical costs and increased competition during the second year of President Barack Obama's health law. Indeed, several insurers plan to enter new states next year after sitting out some markets in the law's first year. United HealthCare, for example, is going into Connecticut, Michigan, Rhode Island and Washington for 2015.
Complicating next year's pricing is the fact that insurers have scant data on their enrollees' use of health services, because many consumers waited until the March deadline to buy plans.
"Carriers are as much in the dark as they were last year, but what they do know is where the rest of the market is," said Robert Laszewski, president of Health Policy & Strategy Associates LLC, a health-insurance consultant in Alexandria, Va.
In all 10 states with complete public rate filings, the insurers with the largest enrollment in 2014 also offered the lowest or second-lowest prices for coverage in the first year of the law's new online insurance exchanges.
With dominant market share now, analysts say, carriers feel they have room to raise rates. Nine of the carriers are proposing average increases for 2015 that range from 8.5% by Anthem Inc. in Virginia to 22.8% from CareFirst for its BlueChoice plans in Maryland. Most of these large carriers' proposed rate increases hover around 10%. Maine's carrier is keeping rates flat.
In Oregon, Moda Health Plan Inc. said it captured about three-quarters of the state's plans sold under the health law for a total of 117,000 enrollees. It has sought a 12.5% increase for next year, citing rising medical costs and the expectation that it will receive less money from a fund designed to offset the cost of sick enrollees.
William Johnson, president of the plan, said price had clearly been a big factor for consumers in 2014, but that he was comfortable his products would continue to be attractive to consumers. "We may lose some, we may gain some, but overall we'll still have a pretty significant market share."
At least two Oregon plans are looking to undercut Moda by lowering their rates for next year. Oregon's Health CO-OP, a nonprofit start-up that enrolled fewer than 1,000 people in the first main enrollment period in 2014, is seeking to slash rates by 21%.
Moda's $221 monthly premium for a midrange "silver" plan for a 40-year-old nonsmoker in Salem, Ore., would go up to $249 in 2015 if the company's rate-increase request is approved by state regulators. Oregon's Health CO-OP would offer a $228 premium for 2015. Such plans cover around 70% of medical costs and have been the most popular choice among consumers buying on state exchanges and the federal HealthCare.gov site.
The co-op's chief executive, Ralph Prows, said it was counting on the lower rates to lift enrollment, and noted health costs from the newly insured might be more modest than initially expected. "We have proposed a significant decrease, and it will leave us in a much better market position on price," he said.
Meanwhile, in Connecticut, Indiana, Maryland, Michigan, Oregon, Rhode Island and Washington, insurers that had low enrollments in 2014 or are newly joining the market for 2015 are now bidding to become the least-expensive option for consumers who want to buy silver plans for 2015.
The proposed increases by large carriers partly reflect medical inflation, which is currently projected at around 5.4% for insured people this year, said Richard Evans, an analyst at SSR Health LLC, an investment-research firm in Montclair, N.J. Those increases will outpace gains in household income, making it probable that consumers will feel them, he said.
It is difficult to determine precisely what impact the Affordable Care Act has had on insurance premiums. Insurance companies say fees and coverage mandates in the law have forced them to raise their rates.
Supporters of the law point to research showing that, before the law passed, premiums were rising steadily for those who buy policies without an employer's help. Jonathan Gruber, a professor of economics at Massachusetts Institute of Technology and a backer of the health-care overhaul, this month published research suggesting that from 2008 to 2010, individual-market premiums grew by 10% or more a year.
Erin Shields Britt, a spokeswoman for the Department of Health and Human Services, said the new exchange system "drives competition among plans, requiring issuers to be more conscious of how they stack up to their competitors, which is a trend we are already seeing accelerate in a number of states, with new plans entering the market."
Opponents say the health law was sold on the premise that it would lower rates, and that increases are evidence the law is falling short. "There's going to be an uproar over premiums right before the election," said Douglas Holtz-Eakin, a top adviser to the 2008 presidential campaign of Sen. John McCain (R., Ariz.).
America's Health Insurance Plans, the main insurer lobbying group, says that sharply rising prescription-drug costs are a main force pushing premiums upward. "We have some very high $100,000 cancer drugs coming on at the end of the year," said Karen Ignagni, the association's president and CEO.
In several of the states where the rate filings have been made available, insurance commissioners have the power to negotiate with companies over their proposed rates. In other states, the health law has created a process by which insurers must issue public justifications of proposed rate increases that exceed 10%. Some consumer groups have said the process doesn't guarantee consumers will see the justifications in time to protest.
One big factor affecting whether consumers stick with their current plans or switch to a lower-priced option is how the Obama administration designs the re-enrollment process for people who bought coverage in 2014. Insurers are waiting to see if the federal government will make it easy for most consumers to renew their coverage without going through many of the steps they did in the first year, which could make it more likely they would also stick with their existing insurance plans.