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Contributors to Exchange Premium Rises

By August 16, 2016Commentary

As is well-known by now, health insurance premiums, especially on the reform law exchanges, are beginning to rise more rapidly.  The obvious cause for this is more use of medical services.  An analysis from consulting and policy firm Avalere examines what service categories are contributing to the increase in premiums.   (Avalere Report)   Avalere examined rate filings in nine states, mostly mid-Atlantic and Northeast, for the individual and small group markets.  These rate filings contain the insurers justifications for the requested premiums.  Six categories of cost were examined, inpatient, outpatient hospital, professional services, drugs, capitation payments and other.  The 2017 filings were compared to those for 2016 and to actual expenses in 2015.  Given all the hubbub about drug prices, particularly for specialty medications, it was a little surprising to learn that the largest contributor to premium increases for 2017 will be outpatient services, although given what hospitals are doing in the outpatient arena, maybe it shouldn’t be surprising.  Although the trends vary by state, overall outpatient spending accounts for 30% of rate increase justifications.  The outpatient category represents 27% of actual spending in 2015.  Both the contribution to premium increases and to actual health plan costs was similar to that in earlier years.  In 2015 plans spend 18% of premiums on prescription medications, and they account for 14% of premium growth in 2017 filings.  Inpatient hospital is 20% of spending, but only a 15% contributor to 2017 rate rises.  Other, which includes lab, radiology and other miscellaneous services, is only 5% of spending but is growing more rapidly, accounting for 10% of the premium increase.  These state filings give a very good sense of where health plans are actually seeing cost increases, whether due to unit prices or utilization, and also often give utilization data.

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