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Insurers Seen As Unlikely to Seek Big Rate Hikes in 2015

By Rebecca Adams, CQ HealthBeat Associate Editor

April 25, 2014 -- Major health insurers are much more concerned about the financial effects of changes to Medicare Advantage and Medicaid payments than the impact of individual market enrollment on their business in 2014, an insurance industry consultant said at a forum last week.

Bob Laszewski told an American Enterprise Institute conference that insurers will raise their rates modestly, but most will not seek double-digit increases.

Laszewski said that insurers and the Centers for Medicare and Medicaid Services (CMS) officials will meet next week to talk about unsettled questions about the payment and reconciliation functions of that still need to be finished. Laszewski predicted the systems on the troubled federal insurance exchange will be ready in September, one year after they were expected to be operational.

Insurers have been sending invoices to federal officials while they wait for the website's functions to be debugged. The administration has been paying insurers without certifying that the invoices are correct, said Laszewski, who estimated that insurers are billing the government for about $10 billion per month for subsidies "with no backup and no reconciliation."

It could be difficult for the federal government to square what insurers are owed to reflect their customers' subsidies against the companies' payment requests, he said.

"We've got the mother of all reconciliations coming," he said.

The colorful consultant, who has been outspoken about sensitive problems related to implementation, said that temporary protections that will buffer companies from major losses during the first three years of the health system changes will be part of the reason why many insurers probably will not hike premiums dramatically when the next open enrollment season begins on Nov. 15 under the health law (PL 111-148, PL 111-152).

Insurance companies have to start submitting their bids in some states in May but they may not become public immediately.

Laszewski had predicted previously that insurers would raise their rates by 9.9 percent—because rate increases of 10 percent or higher are subject to greater government scrutiny.

Panelists at earlier sessions of the conference had discussed details of the law, employers' reactions to it and state officials' efforts to modernize the health care system.

Tracy Watts, a partner at Mercer Human Resource Consulting, highlighted results from a survey that the group released last month showing that as of February, the individual mandate had not made a major difference in the number of employees who were buying job-related coverage through their employers.

Speaker Alan Weil predicted that CMS officials will announce within the next couple of weeks will unveil another round of innovation grants to states that are trying to update the health care delivery systems in their states. In February 2013, 25 states were offered a total of $300 million to implement multi-payer payment and health care delivery system changes that are supposed to improve the quality of health care and lower costs. Six states that received the majority of funding were preparing to implement models that they had already proposed, while three were given funds to finish plans that they were in the midst of preparing. Another 16 states were given money to start work on a plan.

Weil, the executive director of the National Academy for State Health Policy, noted that state officials are usually not partisan or ideological when talking about payment changes that move away from the current fee-for-service system, which critics say rewards volume instead of the quality of care.

And as states get more engaged in changing the delivery of health care and saving money, Weil said, officials may realize that it may be in their interest to run their own state-based exchanges and expand Medicaid.

"As states are getting more mature in thinking about what it takes for multiple payers to come together and demand a more efficient delivery system, some of the important tools you want to use are Medicaid contracting rules and exchange plan certification rules," he said. If state officials don't operate their own marketplaces or broaden Medicaid eligibility, he said, "you've left those tools on the table."

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