Consumers soon will find out whether they will have to pay a lot more for their Obamacare plans next year, with just a few days remaining for a majority of states to finalize them.
State insurance officials have until next Tuesday to approve the plans that will be sold in 2016 and submit them to the federal government for a final sign-off. Rates in the majority of states relying on the federal marketplace, found at healthcare.gov, probably won’t be available until right before the third year of enrollment begins Nov. 1.
But four states — Rhode Island, Oregon, Kentucky and Michigan — already have announced their prices. And rates in the other states running their own marketplaces are expected to trickle out soon as well, likely providing lawmakers returning to Washington after their August recess plenty of Obamacare ammunition to heave at each other.
After a significant number of insurers suggested big, double-digit rate increases earlier this summer, Republicans pounced on the proposals as evidence that President Obama’s healthcare law is pushing up healthcare costs. But Democrats pointed to the past two years, where premiums in the marketplaces had modest increases on average.
At the heart of negotiations is a provision in the Affordable Care Act called “rate review,” where marketplace plans that want to raise premiums by at least 10 percent must post them publicly and then justify the increases to marketplace officials and state regulators. The federal government is acting as insurance commissioner in five states that don’t have one.
Many states already have the authority to reject big increases, although not all exert that power. Other states that don’t have such authority have to use more indirect ways of pressuring plans against major premium increases, like by refusing to contract with them in the marketplaces.
An added twist is that under the healthcare law, insurers have less control than ever before over the price of their plans, now that they’re required to accept sicker customers and provide them with a broader range of services.
Add it all together, and experts say that in some cases, rate review accomplishes the intended goal of getting insurers to avoid big price increases. Other times, it doesn’t work so well and insurers go ahead with big hikes anyway.
“I think it’s sort of working,” said Kip Piper, a health reform consultant. “It’s very much by state, by insurer.”
When Kentucky announced final rates earlier this month, they were nearly identical to the price increases insurers had proposed initially. All but one of the 13 insurers selling individual and small-group plans in the state are raising rates, with most increases between 5 and 15 percent. But the Kentucky Health Co-Operative, a nonprofit plan, will raise rates 25 percent.
It was a similar story in Michigan, which announced its final rates Tuesday. State officials approved all rate changes as insurers requested them. But while the average plan increase is 6.5 percent, three companies reduced their rates while others increased them by as much as 35 percent.
A reason for the big disparities in price hikes is that insurers are still figuring out exactly who is shopping in the marketplaces. It tends to be people who don’t have employer-sponsored coverage, were previously insured or have low incomes — but no one knew exactly what the mix would be of young versus old and healthy versus sick, all of which affects cost.
That meant insurers have to do a lot of educated guesswork. And if states can’t find problems with their calculations, they generally let the rates through.
“We’re seeing that in the 2016 year, a lot of plans announced they were thinking about fairly large rate increases — but that’s based on a process,” said Marianne Udow-Phillips, director of the Center for Healthcare Research and Transformation at the University of Michigan, adding that insurers and regulators are having a “dialogue around the assumptions insurers are making.”
“It’s a science both in terms of actually what’s happened historically, but it’s an art in terms of predicting what’s going to happen for future cost trends,” she said.
There have been some examples of insurers foregoing the big rate increases they originally proposed. CareFirst, Maryland’s largest insurer, proposed a 30 percent increase but ended up raising prices by 16 percent.
“[Rate review] does provide more transparency,” Udow-Phillips said. “It also puts health plans on notice that their rates are going to be more heavily scrutinized, so I’m sure they spend more time looking at the assumptions they’ve made.”
That’s likely to happen in some cases again this year. But many other plans will likely go ahead with the rate hikes, underscoring that shoppers in different state marketplaces will have varied experiences.
“In the past, some plans haven’t increased as much as other plans, so this year they might balance out more,” said Dena Mendelsohn, a staff attorney for Consumers Union.
Even strong supporters of the healthcare law include many qualifications when discussing whether rate review is working as intended. That has a lot to do with the state you live in, said Chris Jennings, who advised the White House as major parts of the law were being implemented.
“In certain circumstances, in different regions of the country, it definitely has worked to moderate premium hikes,” Jennings said.
