Optimism and skepticism over the health insurance marketplace
24th May 2016 · 0 Comments
By Fritz Esker
Contributing Writer
The U.S. Department of Health and Human Services (HHS) released a report stating that premiums in the Health Insurance Marketplace will be lower than many media outlets projected they would be in 2016.
Federal Optimism
“Our analysis highlights how different the premiums that people actually pay are from the rates that are initially proposed by issuers,” said Richard Frank, Assistant Secretary for Planning and Evaluation at the U.S. Department of Health and Human Services. “Consumers’ actual health insurance premiums depend on whether they shop around for the best deal and the availability of tax credits that lower premium costs, both of which changed the picture dramatically in 2016.”
In a press release, the HHS said that average payments based on premium changes based on preliminary rate filings are not a reliable indicator of what customers will actually pay. The HHS cited tax credits, the ability to easily shop and compare programs, and public rate review as reasons proposed rate increases will not affect consumers’ expenses.
In Louisiana, 89 percent of Marketplace customers receive tax credits to protect them from premium increases and enhance affordability. The credits increase if the cost of the second cheapest silver (aka benchmark) plan goes up. As a result, if all premiums in a market increase by similar amounts, then the tax credits will go up to compensate. But the average rate increases reported with preliminary rate findings did not account for the tax credits.
The HHS’ report also pointed out that comparing prices between plans was much more difficult before the Affordable Care Act. Last year, 39% of returning Louisiana Marketplace customers switched plans. The argument is that just because one plan’s rates go up, it doesn’t mean that the customer will have to pay the increased amount. He can shop around on the Marketplace to find a comparable plan at a better value.
“When it comes to shopping, what’s important is that consumers have options,” said Jonathan Gold, press secretary for the U.S. Department of Health & Human Services. “Prior to the ACA, it was nearly impossible for consumers to compare plans and shop around easily — and many Americans went uninsured because they couldn’t afford insurance or had pre-existing conditions. Those who did have insurance in the individual market were often trapped in the plan they had, since people with even small health problems could be denied coverage or charged an exorbitant price if they tried to switch plans or issuers.”
Statewide Concerns
Despite the HHS’ optimism, Louisiana Insurance Commissioner Jim Donelon has concerns about recent developments in the marketplace. The Commissioner acknowledged that the Affordable Care Act has helped Louisiana residents in some ways. Guaranteeing coverage even for people with pre-existing conditions is a good thing. The tax subsidies have helped more poor and working-class people afford insurance. Donelon also supports the ACA’s removal of lifetime limits from insurance policies.
“Folks who are dealing with a catastrophic illness don’t have to worry about it (running out of insurance money),” Donelon said.
But the commissioner said these benefits come with a price. For policyholders who do not receive tax subsidies, premium costs have increased. Also, United Health recently announced that it would be leaving the marketplace in most states (including Louisiana). In April, the company stated that it was on pace to lose $650 million from marketplace plans in 2016.
“The rate increases are a concern, but carriers leaving the marketplace because of their losses is even scarier,” Donelon said.
John Maginnis, vice president of corporate communications for Blue Cross and Blue Shield of Louisiana, said the company’s on- and off-exchange ACA plans received average rate increases of about 15 percent, affecting over 165,000 individual members.
Blue Cross has 85,000 customers on the federal exchange. 90% of those customers receive some form of federal subsidy. For those people, the subsidies typically offset the premium increases.
Maginnis listed several reasons why the ACA is driving up costs. He said the law does not do enough to get healthy people to sign up, the enforcement of special enrollment periods is weak, promised protection by the federal government for high claims and losses has not been delivered, and taxes and fees for insurers have doubled. Also, the costs of medical care in general have increased.
Blue Cross’ aggregate losses in the federal exchange market will exceed $200 million by the end of 2016. While Maginnis is concerned, he remains optimistic.
“We’re financially stable, but no one can sustain those losses long-term,” Maginnis said. But he does not anticipate a sudden departure, a la United Health. “We’re committed to staying in the individual market in Louisiana.”
This article originally published in the May 23, 2016 print edition of The Louisiana Weekly newspaper.
