Health insurers across the country are eyeing slightly steeper cost increases in 2016, a year that will be an important test for how well ObamaCare is working.
The costs of the lowest-tiered individual plans appear to be ticking up, according to multiple experts who have reviewed the proposed rates. The increases vary wildly among plans and among states, but experts say people are still unlikely to face the kind of doomsday scenario critics predicted would occur under the healthcare law.
“The trend is a little bit higher this year than last year,” said Gary Claxton, director of the healthcare marketplace program for the Kaiser Family Foundation.
And as in past years, some of those rate increases have been “enormous,” said Cheryl Fish-Parcham, who directs the private insurance program at the nonprofit Families USA.
Under ObamaCare, all proposed rate hikes above 10 percent were required to be posted online by Monday. Now begins a six-month back-and-forth between insurance companies and regulators as the government tries to reduce rates before locking them in this November.
“These specific rates will be subject to vigorous rate review and revision,” said Andy Slavitt, the acting administrator of the Centers for Medicare and Medicaid Services (CMS).
The proposed 2016 rates will offer the most accurate portrait so far about the health of the marketplaces. Claxton, who reviewed several states’ data, said many of the increases are around 15 to 20 percent, though there are large disparities across regions.
Tennessee’s biggest insurer has proposed an increase of 36 percent for some plans, while one of New Mexico’s biggest carriers is looking at a 50 percent increase. The most popular carrier in Maryland has called for a 30 percent hike.
But in his analyses of numerous other filings, Claxton said he didn’t see rate increases in the double digits.
Companies with the biggest jumps are probably dealing with older and less-healthy customers, the experts said.
Other states are facing more moderate increases, though they would still be steeper than last year’s average increase of 5 percent.
Connecticut carriers are proposing mostly 10 percent increases for their more popular plans, while the market leader in New York has floated a 12 percent hike.
This year’s filing season will be the first time insurers can fully review claims data before deciding what to charge, so the proposed hikes offer new clues about ObamaCare’s success in bringing a diverse group of people onto insurance rolls.
During the first open enrollment period, health insurance companies proposed rates without knowing how many sick people would sign up.
Now with a full year of data available, some insurers are realizing that the balance between sick and healthy customers, also known as the plan’s “risk pool,” is more uneven than they had expected.
“For the first time, we’ll actually have numbers that you can look at, whereas last year, it was all guessing games,” said Sabrina Corlette, director of the Center on Health Insurance Reforms at Georgetown University.
“The challenge last year was that nobody had any data on what to base rates. It was just blind man’s bluff for everybody,” she added.
The data is still incomplete, however, with most states only disclosing increases that are 10 percent or higher. More plans are likely proposing 5 to 6 percent increases, and so are not included in the current data, the experts said.
Under ObamaCare, states have the power to challenge rate increases they consider to be “unreasonable.”
Some states — including Maryland, Delaware, Connecticut and Oregon — are known for taking a strong role in regulating the rates.
Other states, particularly where leaders prefer a free market approach, are much less likely to challenge rates. In Florida, Republican Gov. Rick Scott has said he would not allow state regulators to tamp down rate increases.
“Some states just raise questions about trend and approve different things,” said Claxton of the Kaiser Family Foundation. “Some do formal objection letters, but some do it on the phone.”
“They do have different philosophies,” he added.
In addition to publishing their proposed rate increases by June 1, insurance companies also were required to disclose the reasoning for the increases.
Insurers groups, such as America’s Health Insurer’s Plans, have warned against generalizing about increases in premiums.
“It’s more complex than [ObamaCare],” group spokeswoman Clare Krusing said. “If you want to understand the premium story, you have to look at factors and local dynamics.”
Another driving factor in the steeper 2016 price hikes is that insurance companies are increasing their rates after a year of intentionally below-average prices. In the first year of ObamaCare, many companies set aside costs as they worked to enroll as many people as possible.
“Some carriers had strategically priced low,” said Caroline Pearson, senior vice president of consulting firm Avalere Health. “They’re now going to need to increase their rates to make sure they’re covering their costs.”
While her firm is still analyzing the 2016 data, Pearson said she is not expecting a major upheaval of prices after a relatively successful year for insurers.
“They’re not saying, ‘We’re losing money hand over fist,’ ” she added.
Ultimately, the plans with the largest rate increases, in the 80 to 90 percent range, are less likely to be successful in the long run, Families USA analyst Fish-Parcham said.
“The challenge here is if you keep doing big increases, it becomes a self-fulfilling prophecy,” she said. “The higher the rates go, the more likely it is that younger people will look for other coverage, and you end up with smaller and smaller enrollment.”