How to Explain the Expected Carrier Rate Increases to Your Clients

Reports are springing up around the country about rate increase requests from insurers – and public exchange exits planned by carriers – for 2017. The Henry J. Kaiser Family Foundation’s Gary Claxton wrote an analysis this year that discusses insurer trends and looks at what is expected for the Affordable Care Act (ACA) Marketplaces in 2017.

News broke during the week of July 18 regarding California rates and plan expansions in 2017. The Covered California Health Benefit Exchange said the weighted average premium change for the state’s public marketplace, will be 13.2 percent for 2017 – up from four percent and 4.2 percent in the past two years. Two of the state’s largest insurers, Blue Shield of California and Anthem Blue Cross, sought the largest premium increases for 2017 – more than 19 percent and 16 percent, respectively. Humana also announced its plan to cut its individual market footprint by 88 percent, reducing its sales to just 156 counties in 11 states (as compared to 1,351 counties and 19 states for 2016).

“Shopping is going to be more important this year than ever before,” said Covered California Executive Director Peter V. Lee. “Almost 80 percent of our consumers will either be able to pay less than they are paying now, or see their rates go up by no more than five percent, if they shop and buy the lowest-cost plan at their same benefit level. That’s the power of shopping.”

The Kaiser Foundation analysis, produced by the non-partisan health care organization that is not associated with the Kaiser Permanente health plan, notes that some insurers have had better claims experience and may be able to sustain current plan pricing, while others may be seeking larger rates increases to offset past losses. A complication in setting rates is risk adjustment, which protects insurers enrolling a disproportionate share of higher-risk enrollees and penalizes firms enrolling healthier-than-average individuals.

In its analysis, the American Academy of Actuaries, a professional association of 18,500 actuarial professionals, notes that insurers have more information today than they did in prior years regarding health care and treatment trends as well as the risk profile for enrollees. Premium filings in the early years of the ACA were based on expected enrollee demographics; for 2016, rates were based on 2014 experience and interim risk adjustment info from 2015. In some cases, insurers have found those prior year premiums were too low. The Blue Cross Blue Shield Association said in March its plans’ members had higher than expected rates of disease and received significantly more medical care, on average, than those enrolled in individual plans prior to the ACA. That is part of why rate increases being sought for 2017 are higher.

Nationwide, the Los Angeles Times reported in July that Kaiser’s analysis of 14 metropolitan areas found an average individual plan premium jump of 11 percent for 2017. The changes ranged from a decline of 14 percent in Providence, Rhode Island, to an increase of 26 percent in Portland, Oregon. It’s not yet known how rates in the group marketplace may be affected for 2017. Through the first half of this year, many carriers have resisted implementing any rate changes; some have announced rate increases for 2017, while others have announced rate decreases for the new year.

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