Health care insurers still adjusting to new market

Last edited 2:18 p.m., Nov. 7, 2014

In a rapidly changing American health care market, insurers are waiting for the dust to settle on complex legislation, resulting in a marketplace with little certainty for consumers.

Gail Floyd, a compliance analyst with St. Louis-based HM Employee Benefit & Risk Management Specialists, said with legislation as complex as the Affordable Care Act, it takes time for the market to catch up.

“Insurers had to set their premiums for 2014 without really any knowledge about what to expect with regards to claims,” said Floyd, who also works with clients in the firm’s Springfield office to provide advice on the ACA.

It could be several years until some of the promised stabilization of President Barack Obama’s tenure-defining health care law is seen in the market.

“It is supposed to be easier,” Floyd said. “That’s a very complicated proposition in any market when you’re selling health insurance, because it’s never quite easy to compare doctor networks and prescription drug formularies.

“It’ll take a while, but this is a step in the direction that they want to go.”

Tom Jensen, employee benefits manager for Connell Insurance Inc., said the federal government’s decision this February to again change rules regarding employers further muddied the water.

Under the transitional relief rule – what Jensen dubbed the “keep what you have provision” – companies can renew under old rates, similar to when the federal marketplace rolled out in 2013. They also can move toward providing insurance under the ACA, he said. Although employers with fewer than 50 full-time employees aren’t required to provide health insurance under the ACA, the federal insurance exchanges are still an option for group plans.

Jensen pointed to the ACA-mandated “community rating,” where insurers can only take into account age, geographic location, tobacco use and the policyholder’s plan category.

“On the health care reform, or the ACA-compliant options, that are moving toward that community rating, those increases have been – and I’m not making this up – anywhere from 15 percent to 98.7 percent,” Jensen said. “If you want lower premiums, you need a younger workforce.”

Trevor Crist, CEO of Nixon & Lindstrom Insurance, said groups with less than 50 employees are largely choosing to renew their current non-ACA programs for 2015. However, he said those employers are unable to make carrier or plan changes, if they want to stay with their current programs.

“Though we are seeing average increases in the double digits on these, it is far less than equivalent ACA-platform options,” Crist said via email, noting the exception would be groups with historically high utilization. “These groups can save money by avoiding medical underwriting and going on an ACA-platform plan option.”

Floyd estimated overall 4 percent health care inflation in 2015.

“Some groups are high. Some groups are looking at 19-20 percent renewals,” she said.

Floyd said insurers participating in individual insurance markets could spike their nationwide premiums to offset potential losses from the first year.

“In the second year, we’re going to see premiums being set in response to what we saw on the exchanges the first year,” she said. “I don’t know if that’s necessarily going to spill over into the group market or not, but that is another thing that’s going to explain what happens at least on the individual exchanges.

“Those rates are going to be all over the map.”

Data compiled by the Health Research Institute at PricewaterhouseCoopers suggests premiums via health insurance exchanges will see an average bump of 7.5 percent in 2015. The study, however, found a wide variance. Nevada consumers with Time Insurance Co., for example, might pay 36 percent higher insurance premiums next year, while the biggest annual savings are expected in Arizona, with premiums dropping for some customers by as much as 23 percent.

Although some insurers are releasing premium increases early, PWC found little data for Missouri. The state has no authority to review insurance rates before plans are sold, according to media reports. The study forecasts an average 2015 rate of $270 per individual in Missouri, but it doesn’t predict a percentage change. Show-Me State neighbor Kansas is projected to have an average premium increase of 15.5 percent, while premiums in Iowa are expected to rise 13.8 percent on average, according to PWC data.

The ACA’s flagship website, HealthCare.gov, isn’t slated to release 2015 premiums until Nov. 15, after the Nov. 4 election.

Last month, the Kaiser Family Foundation/Health Research & Education Trust released its 2014 Employer Health Benefits Survey. According to Kaiser, premiums for family health coverage on employer-sponsored plans rose, on average, 3 percent in 2014 to $16,834. The Midwest average for all plans was about the same, at $16,800.

Workers paid an average $4,823 toward the cost of family coverage, according to the study of more than 2,000 small and large employers.

Deductibles, meanwhile, have risen 47 percent since 2009, with 80 percent of all covered workers facing a general annual deductible of $1,217 in 2014. According to the Kaiser study, 41 percent of survey respondents face a deductible of at least $1,000, while 18 percent are in the $2,000 range.

“The whole design of the Affordable Care Act is that we have a marketplace where the insurers are competing against each other and they’re setting premiums at a level where they think they can be profitable but at the same time be competitive,” Floyd said.

“The idea is we standardize the benefits so all the benefits are roughly the same, we set standards for what the cost-sharing can be like so that eventually the plans are easier to compare.

“It is supposed to be an apples-to-apples comparison.”[[In-content Ad]]