McKinsey Report on Exchange Premiums

There is so much information floating around on premium levels on the public health insurance exchanges that we find ourselves very confused.  A McKinsey Center for U.S. Health System Reform brief gives the firm’s perspective on that issue.   (McKinsey Brief)   What really counts of course is the average of all the premiums for the plans actually picked by enrollees, sorted by each benefit design, and then compare those averages to the ones last year for the same benefit design.  Pretty impossible when the benefit designs change, but you can come close within at least the metal levels.  On this weighted average, same plan analysis, McKinsey found a 9% increase.  McKinsey got county level data on all 335 carriers participating on the exchanges and on the products they were offering in 2014 and 2015.  From this data they made 5 key observations.  The first was that in most counties consumers had more carriers and more plans from which to select, with carriers increasing 19% and benefit plans 27% on a national basis.

For the lowest price exchange plans, which have seen the highest enrollment, premiums rose at a median level of 6%.  For the subset of low-priced plans in 2014 that refiled for 2015 (note that many did not refile because they were from the coops that are going broke at an alarming rate), the median increase was 10%.  Broad network plans like PPOs had higher premium increases than did more constricted network design plans.  Next, McKinsey observed that switching products could lower premium increases for many enrollees, but would not necessarily lower costs as the reduced premiums are associated with higher deductibles.  Net premiums for subsidy-eligible consumers have risen.  Finally, recent and new entrants on an exchange tend to have the lowest premiums, but don’t expect that to last.  As with 2014, most of the low-priced plans appear to be morons who are actuarially challenged and lose a lot of money.  As mentioned above, the coops in particular suffered from this actuarial deficit.  Expect that the many of the low-priced 2015 carriers will be suffering by the end of the year and either won’t participate or will raise prices for 2016.  Of course, consumers pay the price, literally and figuratively, for this poor behavior by plans, as they are forced to find new coverage which is likely more expensive.

And we never tire of pointing out that these premium increases, however calculated are way above GDP growth and most importantly, personal income growth.  Health care is taking more out of the consumers’ pocket and a bigger share of all spending.