Payers Predict that Health Plan Premiums Will Rise in 2015

Exchange enrollment numbers recently topped 7 million people this past week, which means insurance companies across the United States are already predicting a hefty increase to consumers’ 2015 health plan premiums. Payers cite the fact that an increase of high-risk consumers, such as the sick and elderly, will require them to raise premiums. This could mean that many of the “young invincibles,” whose enrollment is necessary for covering higher-risk members, may jump ship next year.

“If rates in California increase by 20%,” said Robert Laszewski, a healthcare consultant in Virginia, “enrollment will go down and any healthy people will bail.”

Various factors will shape plan premiums nationally. Chris Carlson, principal and consulting actuary at Oliver Wyman, and James O’Connor, principal and consulting actuary for Milliman, say there are 4 main considerations that will impact insurers’ 2015 pricing:

1. The variation of the insurer’s risk pool and patient population.
2. The risk mitigation program—risk adjustment, reinsurance and risk corridor—will have less funding in 2015.
3. Narrow provider networks, including those that are value-based, versus other network offerings.
4. Insurer competition and pricing. Lower plan pricing may have worked to gain enrollees in 2014, but in 2015, that strategy may be even more imperative to keep or attract members.

“We’re going to be answering to the public why the rates are going up even though there is plenty of reason for it,” said Mr Carlson.

Chet Burrell, chief executive officer of CareFirst BlueCross BlueShield, echoes Mr Carslon and Mr O’Conner, saying that 2015 premium rates are a concern for both insurers and consumers.

“I do think it’s likely that premium rate shocks are coming. I think they begin to make themselves at least partially known in 2015 and fully known in 2016. That will be different in different parts of the country. I don’t think it will be uniformly the same,” Mr Burrell said.

Some insurance companies may simply have no other choice than to raise premiums so that higher-risk patients in their networks are covered.

Around the Web

Insurers Already Calculating 2015 Premiums as Obamacare Kicks In [Los Angeles Times]

4 Factors Shaping Higher 2015 Premium Prices [Healthcare Payer News]

US Insurers Fear Backlash Over New Obamacare Rate Increases [Reuters]