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Exchange Rates: Feel-Good Story for the White House—or Not So Rosy?

By John Reichard, CQ HealthBeat Editor

May 29, 2013 -- Buoyed by last week's news that premiums in California's insurance exchange will be lower than expected, health care law supporters are seizing on the story line that predictions of rate shock under the overhaul are not coming true.

While word on the premiums insurers plan to charge on the federal exchange that will serve Georgia residents ties in with that story line, the proposed rate increases for the Rhode Island marketplace suggest that premiums charged by insurers under the health care law may be a mixed bag.

Seven insurers have filed to offer individual coverage on the federal exchange in Georgia, according to a report by Georgia Health News, which describes itself as a nonprofit, independent news organization unaffiliated with any political party or partisan interest.

Those insurers include Aetna, Alliant, Blue Cross and Blue Shield of Georgia, Coventry, Humana, Kaiser, and Peach State.

Based on information obtained by Georgia Health News under a Georgia open records law request filed with the state's insurance department, "it does not appear that rate shock is a major issue in Georgia," says William Custer, director of the Center for Health Services Research at Georgia State University. Custer is a former director of research at the Employee Benefits Research Institute and an economist with the American Medical Association.

Premiums for someone in his or her 40's buying individual coverage on the exchange will be comparable to, or even lower than, those charged on average in Georgia's small group market, Custer suggested. "Young individuals may pay more in the individual market then they do now, but less than they would for group coverage."

But what if the comparison is not between individual plans and the small-group market, but year-to-year between 2013 and 2014 for individual coverage? Industry and consulting-firm studies have predicted huge rate increases under that scenario, saying benefits will be more comprehensive and that the health care law imposes various fees that will be passed along to consumers.

Custer says he has very limited data on that point, and it comes from the Kaiser Permanente high-deductible plan his son has. That plan now offers coverage that appears to be comparable in scope to a plan Kaiser will offer on the exchange. In that case, premiums will rise by 10 percent, much less than predictions of rate shock, Custer said.

Meanwhile, in Rhode Island, four insurers have filed to offer coverage on the exchange in that state, says Patrick Tigue, a policy associate in the office of the state's insurance commissioner. Those insurers have requested unusually large rate increases for 2014, he says. For example, the Rhode Island Blue Cross Blue Shield plan has requested an 18 percent hike and a 15 percent hike in the small-group market. United HealthGroup wants to hike premiums by 13 percent for a PPO in the small-group market and 18 percent for an HMO. Tufts Health Plan wants rate increases of 10 percent and 11 percent respectively for those types of plans.

Proposed double-digit hikes suggest that the rate picture won't be as rosy in Rhode Island's exchange, but even there it's too soon to say that the Obama administration and supporters of the health care law (PL 111-148, PL 111-152) won't ultimately be happy with the rate picture in Rhode Island.

Tigue says he wouldn't use the term "sticker shock" to describe the impending premium increases in the state. "We have a very robust review process" for rates, he says. Rhode Island is among the states that have the power to reject proposed increases, he notes. "We don't put a lot of stock in what they've estimated" as the rates they need, he added. Rate review has "always resulted in a significant decrease."

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