WASHINGTON — As state health exchanges continue to announce lower-than-expected rates for health insurance, experts say both state and regional issues play a part in how much a consumer will pay for insurance beginning in January. Several factors come into play: a state’s regulations, how many insurers will participate in the state and federal exchanges, and what kind of a risk those insurers are willing to take.
“There is tremendous existing variation within the rates in the states now,” said Sherry Glied, professor of health policy and economics at Columbia University and former assistant secretary for planning and evaluation at the Department of Health and Human Services. “It’s hard to compare the old rates to the new.” Maryland’s insurance commissioner said Friday that the expected new rates for residents who will need to buy insurance starting Oct. 1 are up to 33% lower than expected, and that coverage for a 21-year-old non-smoker could cost as low as $93 a month.
In Connecticut, insurer HealthCT announced plans that would drop an average of 36% from its original proposal in the individual market; and Nevada will sell plans to young adults to cover catastrophic health situations for less than $100 a month. An HHS report released this month showed that silver health exchange plans — the lower cost plans that uninsured people are more likely to buy — are an average 18% lower than anticipated in the 11 states the department studied. “We know the rates are coming in lower than we expected,” Glied said. “They’re coming in well below the Congressional Budget Office’s estimated rates, which people thought were optimistic.”
These new rates apply only to those who are currently uninsured and who will be buying insurance through the state or federal exchanges. A health exchange or marketplace is a website that allows consumers to choose from several different private insurers. Under the 2010 health care law, Americans who buy health insurance on the state exchanges can choose from four types of plans — bronze, silver, gold and platinum. Bronze has the lowest levels of coverage and cost; platinum is the elite and most expensive. Industry surveys and records from Massachusetts, which enacted a health care law in 2006, show the overwhelming majority of people buy either bronze or silver plans.
Not all states are reporting lower rates. Republican Indiana Gov. Mike Pence, who opposed the health care law while a U.S. representative, released preliminary statistics showing rates would be 72% higher than current plans. But those numbers lumped all four categories of coverage together.
Rates for New York and California, two of the nation’s three most populous states, have also come in lower than expected.
What about people who already have insurance through their employers? “The exchanges should have absolutely no effect on how the market works,” Glied said.
States with insurance markets that were dominated by one health insurer may not see as many benefits from the exchanges, said Linda Blumberg, who focuses on health insurance research at the Urban Institute, a non-partisan think tank that conducts economic research. For example, in Alabama, one insurer holds the majority of the market, so it’s hard to push competition even with the new exchanges.
“That’s difficult to change,” Blumberg said. “Entering a new market is costly and difficult.”
Dave Axene, a fellow at the Society of Actuaries, which estimated higher premium costs than did the government, agreed that most people will choose silver and bronze plans. But some insurers have delayed entering the exchanges before they’ve “stabilized,” he said. such as United HealthCare and Cigna, which have stayed out of the California and Missouri exchanges.
“They’re saying, ‘Do I really want to take that much risk for a population that may not be as large as my regular business?'” he said. “They might get in later down the road.”
Some companies, Axene said, feared they would set rates too low and end up with too many sick customers or bid too high and not get enough customers.
In some markets, that won’t matter, but in a place like Alabama, “it could be a problem.”
In Connecticut, HealthCT revised its rates lower after seeing data showing the uninsured people who plan to buy insurance are healthier than originally anticipated, said Kenneth Lalime, the company’s CEO.
That has the potential to drive rates lower, just as having a larger percentage of safe drivers in an auto insurance pool pushes those rates lower.
In the 11 states HHS analyzed, the report said “that greater competition and greater transparency are driving down prices in the marketplace.” The agency studied rates in California, Colorado, the District of Columbia, New Mexico, New York, Ohio, Oregon, Rhode Island, Vermont, Virginia and Washington. In six states, those costs are also 18% lower than small employers had paid in the past for similar plans. Some states may see individual rates go down as much as 50%.
The actual rates are lower than HHS, the Government Accountability Office, insurance companies and the Society of Actuaries expected them to be.
For Americans who receive health insurance through their employees, HHS statistics show those rates are stabilizing. Those rates increased by 3% from 2011 to 2012, the lowest increase since 1996.
article by Kelly Kennedy via usatoday.com