Column by Jonathan Wu
Link to full report on ValuePenguin.com: Click here.
Even though the 2014 open enrollment period feels like it just closed, insurers in many states are already preparing for next year. With the next enrollment period only months away, the insurance companies already need to begin submitting changes to plan premiums and benefits to the appropriate regulatory bodies.
We examined filings in Washington and Virginia to see what the companies were proposing as it pertained to rate changes for 2015. Companies in each state indicated the average premium change that their existing consumers would face, as well as the range of % changes that people would see. While the proposed changes are not final they do give us some insight as to what the insurers are thinking when it comes to the rates they are currently charging and what they feel they’ll need to charge to make Obamacare work.
The filings appear to indicate that insurers are leaning heavily to increasing rates on the most popular plans during the next year. Our initial read is that companies who had very competitive rates for their plans were able to attract a significant portion of new business, but at rates that are likely unsustainable in the long term. Consumers that chose these plans may see premium hikes in 2015 that will make them more inline with the other marketplace participants.
There is also the possibility that the state regulators prevent the companies from raising rates as much as they would like.
Washington State
| Company | Policy Holders | Average Change | Min. Change | Max Change |
| Bridgespan | 9,173 | 1.7% | -3% | 1.7% |
| Molina | 1,223 | -6.8% | -4% | -9.5% |
| Kaiser | 7,105 | 0.57% | -3.3% | 1% |
| Premera | 54,049 | 8.1% | 7.7% | 9.9% |
| Lifewise | 67,402 | 8.9% | 7.7% | 9.9% |
| Group Health | 24,079 | 11.2% | -4.0% | 20.4% |
| Coordinated (Ambetter) | 25,915 | 11.2% | 1.12% | 15.89% |
Washington is probably the most illustrative when it comes to the impact of pricing. As you can see from the accompanying table, the plans with the largest membership base are seeing a much larger upwards change in the premiums for 2015. Using the Washington Health Plan Finder, we quickly learn that the most popular companies, Premera, Lifewise, Group Health and Ambetter, are also among the cheapest companies in 2014. It’s therefore no surprise that these four have the highest enrollment numbers with most consumers suggesting that price is the primary factor in how they choose a plan.
What is troubling about the data is that among these insurers, there is clearly an issue with the premiums offered in the first enrollment period. Consumers that adopted plans from these companies may face average rate increases that are significantly higher than their counterparts. Meanwhile companies such as Molina (NYSE: MOH) that had higher 2014 premiums are actually lowering premiums in the next year. If the experience in Washington is indicative of the Obamacare exchanges, then consumers might need to brace themselves for rate hikes in the coming months.
Virginia
| Company | Policy Holders | Average Change | Min. Change | Max Change |
| CareFirst | 32,303 | 14.9% | 8.4% | 24.5% |
| Kaiser | 10,176 | 3.3% | -18.4% | 4.1% |
| Optima | 6,283 | 9.0% | -10.0% | 18.6% |
| Anthem (Healthkeepers) | 113,614 | 8.5% | 0.5% | 16.6% |
| Blue Preferred | 7,697 | 9.8% | 8.8% | 10.9% |
The story is similar in Virginia. While there is a wide range of rate changes even within individual companies the average change is an indicator of where most of the policy base really lies. Take Kaiser for instance, where some consumers might see a nearly 20% decrease in their rates. The company has filed for an average rate increase of 3.3%, much closer to the 4.1% maximum rate increase among its policy holders. This tells us that significantly more individuals will be seeing a rate hike than a reduction. All things considered a 4.1% increase is a modest change in the cost of insurance.
For consumers of the other companies however, the rate changes are apparently more problematic. The other 4 companies have average increases well above 8% with some policy holders seeing much larger increases.
Data Sources
- Virginia: http://www.insurance.wa.gov/health-rates/search.aspx
- Washington: http://scc.virginia.gov/boi/SERFFInquiry/default.aspx
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