Many Insurers Propose Double-Digit Premium Rate Hikes for 2016
Many health insurers have proposed premium hikes greater than 10% for individual health plans sold in 2016, citing higher-than-expected care costs and other unexpected expenses, the AP/Los Angeles Times reports.
The Obama administration released the proposed rates Monday on HealthCare.gov. The premium hikes would apply to plans sold through both the Affordable Care Act's federal exchange and the private insurance market (Murphy, AP/Los Angeles Times, 6/2).
The proposed rates vary significantly across states and health plans (Ferris, The Hill, 6/1). For example, Blue Cross and Blue Shield of North Carolina proposed a 26% rate increase, and companies in Florida, Illinois and some other states proposed rate increases of at least 20% (AP/Los Angeles Times, 6/2). Tennessee's largest health insurer proposed a rate hike of 36% for some plans, while New Mexico's largest insurer proposed an increase of 50%. In Maryland, the state's largest insurer proposed a 30% rate hike.
Meanwhile, insurers in some states have proposed more moderate increases. For example, insurers in Connecticut have proposed increases mostly around 10%. In New York, the most popular insurer has proposed an increase of 12% (The Hill, 6/1). Further, Michigan's Blue Cross Blue Shield and Blue Care Network, which insures more than half of the state's residents, proposed increases averaging about 10%, according to the state insurance department (Eggert, AP/Washington Times, 6/2).
The companies said increasing costs under the ACA's coverage expansions and rising prescription drug prices, among other factors, were driving the rate hikes (AP/Los Angeles Times, 6/2). In addition, the risk corridors program -- an ACA provision under which the federal government subsidized health insurers to help offset high costs they might incur by enrolling higher-than-expected numbers of sick people through the exchanges -- has expired, requiring the insurance companies to bear more of such individuals' care costs.
Proposals Might Not Mean Increased Consumer Costs
Acting CMS Administrator Andy Slavitt said the "rates will be subject to vigorous ... review and revision" before taking effect (Demko, Politico, 6/1). State regulators in many states have the authority to reject the proposed increases. Meanwhile, regulators in states that do not have such power are expected to pressure insurers to curb the hikes, according to the AP/Los Angeles Times. The rates will be finalized this summer and should be published by early October, a few weeks before the ACA's third open enrollment period begins on Nov. 15 (AP/Los Angeles Times, 6/2).
In addition, rate increases do not necessarily mean consumers will be paying more for their health plans. According to CQ HealthBeat, many individuals who purchase coverage through the exchanges qualify for federal subsidies that help offset premiums (Adams, CQ HealthBeat, 6/1).
Health insurance experts say it is too soon to draw conclusions from the data. According to experts, the ACA only requires insurers to report potential rate increases of 10% or more, meaning the reported rates offer only a partial glimpse into the market (AP/Los Angeles Times, 6/2). They noted it is likely most plans are proposing increases between 5% and 6% (The Hill, 6/1). In addition, the data do not include proposed rates in states the run their own exchanges (Politico, 6/1). Further, experts said that insurers that proposed the largest increases likely have risk pools comprised of older and sicker consumers (The Hill, 6/1).
The Kaiser Family Foundation's Larry Levitt said, "It's hard to generalize, but that said, I think all signs are pointing to bigger premium increases than in 2015." He noted insurers for the first time are basing the 2016 premium rates on a full year's worth of claims data under the ACA's coverage expansions.
Meanwhile, American Academy of Actuaries Vice President of Health Catherine Murphy-Barron said some insurers could be proposing more sizable increases for 2016 because they priced their rates much less than their competitors for this year. She added, "The increase is not the right thing to be looking at, it's the general level of the premiums of everyone in that market at that tier" (AP/Los Angeles Times, 6/2).
Cheryl Fish-Parcham, who oversees Families USA's private insurance division, said in the long run plans proposing large premium increases will not survive. She said, "The challenge here is if you keep doing big increases, it becomes a self-fulfilling prophecy," adding, "The higher the rates go, the more likely it is that younger people will look for other coverage, and you end up with smaller and smaller enrollment" (The Hill, 6/1).
Republican lawmakers were quick to jump on the proposed increases as evidence the ACA is not working. Sen. Richard Burr (R-N.C.) in a statement said, "Despite being promised that Obamacare would lower premiums, it is doing the exact opposite" (Politico, 6/1).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.