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Analysis of 2016 Exchange Filings

By July 1, 2015Commentary

There has been a lot of press already around the premium filings for health plans sold on the insurance exchanges for 2016, with suggestions of very high rates of increase in at least some states.  The Kaiser Foundation does an analysis in selected states of both participating insurer changes and premium filings.  (KFF Brief)  Ten states and the District of Columbia were included and the lowest and second-lowest costing silver plans were the focus of the analysis, because those plans serve as the subsidy benchmark and they are the most commonly purchased plans.  As the report points out, not all the rates are finalized yet.  The second-lowest silver plan in these areas is proposing an average 4.4% increase, up significantly from .6% decrease in the same areas from 2014 to 2015.  The range is quite wide, from an increase of 16.2% in Portland, Oregon to a decrease of 10% in Seattle.  There are four areas with close to 10% or higher increases and Seattle is the only one with a decrease.  If Seattle weren’t in the analysis, the average increase would be a percent higher.  The lowest cost silver plan is seeing an average increase of 4.5%, ranging from a 19% rise in Richmond, Virginia, to a 4.2% decline in Seattle.

And here is a really telling statistic.  Plans have obviously been very poor at actuarial prediction.  Only in one instance is the plan offering the lowest cost silver coverages in 2015 still the lowest in 2016.  This means if enrollees want to keep their costs low, they will have to switch plans, and potentially providers.  It will be interesting to see how willing consumers are to bounce around from plan to plan or whether they will just stay and pay more.  It is highly likely that when we get to 2017, the actuarially-challenged plans who offered low prices in 2016 will have to substantially raise them for 2017.  This heightens the importance of doing the weighted enrollment average described below to really understand the impact on consumers.      In general, the number of insurers offering plans in a market in 2017 stayed the same with maybe one insurer added or deleted.  Insurers still don’t have complete claims information over a sufficiently long enough period of time to really understand the risk pools they are taking on, but so far, as they get that information it seems to be leading to premium rises.  And the federal programs to moderate rate growth will eventually expire, leaving the plans fully exposed to the wisdom or folly of their rate setting.

Of course, what is missing from the Kaiser analysis is benefit changes, which need to be taken into account to understand the real price increase.  If a premium only rises 3%, for example, but the deductible and other cost-sharing increases, the total price to the consumer has likely risen more than 3%.  In addition, while the analysis focuses on silver plans, to understand the real complete impact of premium changes, you would need a weighted average across the plans actually purchased by consumers.  That information obviously wouldn’t be available until after open enrollment is complete.   And this report looked at rating areas with major cities; rural areas may be less competitive and for other reasons may see larger increases.  I suspect that these factors would move the real weighted by enrollment cost increase above what the KFF analysis finds, which in any event is well-above the average income growth that consumers are experiencing.

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