Everyone is breathlessly awaiting the filing of proposed exchange insurance rates for 2015. The filings have begun in a few states and most will be due by the start of summer. A report from the American Academy of Actuaries lists factors which will affect those rates. (Actuary Report) Critical factors cited in the report, which are typical for most health insurance premium-setting exercises, include the composition of the risk pool–how large is it and does it have a representative sampling of the population or more or less high-cost individuals. So far insurers mostly have only demographics to rely on in estimating costs in 2014 or 2015 for their enrollees; they have little actual medical claims experience. Most insurers ended up an older population from the exchanges than projected, which likely raised costs. The law, however, requires that they use a single risk pool for their individual enrollees, including any who signed up outside of the exchanges. This combined risk pool may be more representative. In states that allowed non-compliant plans to be continued for 2014, and now again for 2015, the risk pool may suffer because high-cost members may have gone to the exchanges, where the plans generally have better and therefore more expensive coverage, while low-cost individuals likely stayed on their cheaper, non-ACA plans. Another factor affecting 2015 rates is the reduction in government-provided “reinsurance” for high-cost individuals. The loss of this reinsurance or stop-loss coverage will mean premiums will need to be higher. In addition, the law imposes a tax on health insurers, which is rising rapidly each year and ends up being incorporated in rates. If the narrow networks used by many plans in 2014 have to be broadened, that will likely raise rates. Projected overall national health care utilization and price trends will be a major factor and so far price seems stable in 2014, but utilization is rising rapidly. Finally, market competition may affect insurers rate strategies.
Those who don’t like the reform law are quick to pick up on projected increases in rates, while the law’s apologists have noted aberrations like a filed reduction in proposed rates by one insurer in one state for 2015, without noting that this insurer had the highest rates for 2014. What is very, very indisputable is that completely contrary to what the President and his allies repeatedly told us would be the case, health insurance rates are not going down. In fact, it appears that on average for 2015 so far, rates will be up at least twice the likely growth rate for GDP in 2015. This is very understandable in light of what cost trends appear to be so far in 2014–those cost trends are the real major factor in premium setting.