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All Eyes on Premium Rates as Insurers Prepare for Next Health Law Sign-Ups

By Rebecca Adams, CQ HealthBeat Associate Editor

June 27, 2014 -- Wellpoint Inc., the nation's biggest managed care company, has seen a slight uptick in sign-ups since the health law's open enrollment period ended in April and projects that it will cover about 750,000 people this year, according to federal affairs vice president Elizabeth Hall.

Hall spoke at an Alliance for Health Reform briefing on 2015 rates. She said that the Indianapolis-based company, which operates in 14 states under the Blue Cross/Blue Shield brand, has proposed 2015 premiums for individual coverage in every state that it operates in, but that not all are public yet. Many customers will see premium hikes but some will see their costs cut.

So far, premium rates for the individual market in 2015 have been disclosed in 15 states, according to Rachel Nuzum of The Commonwealth Fund.

The McKinsey consulting firm is tracking rate filings and estimates that 77 percent of people who received subsidies this year will see increases in the premiums of the lowest-cost silver plans. Some 23 percent will see decreases, according to the firm.

McKinsey also examined the biggest increases and decreases by the level of coverage in 12 states. For bronze-level plans, which cover about 60 percent of patients' costs, the lowest-price plan will have a maximum decrease of 28 percent and a maximum increase of 27 percent.

For the lowest-price silver plans, which cover more costs than bronze plans, the biggest drop in premium costs was a 29 percent decline while the largest increase was a 17 percent bump. The second-lowest price silver plan, which is the level to which additional cost-sharing subsidies are linked, saw a maximum decrease in costs of 30 percent and a maximum increase of 15 percent.

McKinsey said that 18 new companies will enter the market in 2015. The company also provides state-by-state information.

It will take time to get a national perspective on premium changes, said Massachusetts Institute of Technology professor Jonathan Gruber, a supporter of the health care law (PL 111-148, PL 111-152). The biggest disclosure of information will come when rates in the federal marketplace are released.

Gruber noted that before the health law was enacted, insurers did not have to provide a minimal level of benefits and rate increases of 10 percent or more were common. Earlier this month, The Commonwealth Fund published a study by Gruber that analyzed rate increases from the three years before the law passed.

Hall and panelist Cori Uccello of the American Academy of Actuaries emphasized that insurers faced tremendous uncertainty in 2014 as they priced their insurance offerings, and that insurers still don't have a lot of claims data that would help them predict future medical costs by their customers. Insurers have fragmentary medical claims data and more pharmacy claims data, said Hall, but it will be three or four years before the companies will feel as if they really understand the new market.

Federal programs such as the reinsurance program help insurers quite a bit, said Hall. Under that program, the federal government picks up some of the costs of expensive cases.

"Very clearly, you can see it in our filings," said Hall of the reinsurance program. "It is something that I think all insurers factor into the pricing."

Other efforts to insulate insurers, such as risk adjustment and risk corridor payments, are a little harder to predict, Hall said. The reconciliation process for insurers to get estimates of their payments from those programs will not occur until next spring, she said, and payments will not come until next summer.

The risk adjustment program shifts money from insurers that have a lot of healthy customers to companies that enrolled a higher share of sicker, more costly patients. The risk corridor program limits insurers' losses and profits.

Uccello noted that because risk adjustment shifts money between insurers, the companies insurers have to figure out for their estimates how healthy the consumers in the market as a whole will be. The complexity of those calculations is "exacerbating the uncertainty" for insurers.

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