News & Commentary

ACA Premium Hikes Called Very Likely


It’s going to be ugly next year when it comes to premiums on the ACA exchanges, according to Marilyn Tavenner, CEO of America’s Health Insurance Plans. And although Tavenner speaks for the premier health plan lobbying organization, she was there at the creation of the exchanges in her then role as head of CMS.

CMS officials want Tavenner and others to calm down, pointing out that the dire predictions for 2016 did not pan out with the average premium rates increasing only about 4% for consumers, instead of the double-digit increase that had been expected.

But Tavenner tells Morning Consult, an online newspaper and media outlet, that in addition to the old reliable increases in medical and pharmacy costs, some new factors are in play. She referred to the fact that two of the three “risk mitigation” programs established under Obamacare will end in 2017, reinsurance and risk corridors. Risk adjustment will continue.

The idea was that after three years, they could be done away with because marketplaces would be more stable and insurers would have a better grasp on the health status of enrollees. “Reinsurance and risk corridors could end without much ado. But that hasn’t happened,” according to Morning Consult.

Perhaps more vexing is the special enrollment period (SEP), to be used for those who did not enroll during the open enrollment period (OEP) but then found a need for coverage, such as losing their job and health benefits. Insurers argue that the SEPs allow consumers to enter a market only when they’re sick.

AHIP paid Oliver Wyman to crunch the numbers, and they don’t look good. SEP enrollees are more than 40% more likely to let their coverage lapse, thus increasing churn that helps to increase premiums.

Oliver Wyman examined data from 13 health insurers’ premiums of about $27 billion from January 2014 through June 2015, and about $26 billion paid in allowed claims, using claims filed during the same period and paid through October 2015.

The per-member, per-month claim costs during the first three months of enrollment in 2014 were 24% higher for SEP beneficiaries than OEP beneficiaries.

The Oliver Wyman study asserted that CMS’s efforts to crack down on misuse of SEPs has so far not been encouraging, as witnessed by the withdrawal from the exchanges by UnitedHealthcare and other insurers.

“Through regulation and guidance, the eligibility categories allowing an individual to qualify for an SEP have expanded to include over 30 different criteria and there is considerable concern among issuers that individuals are using SEPs to delay purchasing health insurance until a need arises.”

CMS is not deaf to these concerns. In May it announced that it has eliminated some of the SEPs and will begin requiring documentation for some of the more common SEPs.

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