KENTUCKY — The federal health law requires that insurers planning to significantly increase premiums for policies on a health-insurance exchange to submit their rates by June 1 for review.
Many insurance carriers across the country, including four in Kentucky, are requesting double-digit increases in insurance premiums for 2016.
For the individual market, the requested average rates from companies already participating in the Kynect exchange are:
- Anthem Health Plans, 14.6 percent increase;
- CareSource Kentucky, 11.8 percent increase;
- Humana Inc., 5.2 percent increase;
- Kentucky Health Cooperative, 25.1 percent increase;
- WellCare Health Plans, a 9.28 percent decrease.
The rates are not final, but are subject to approval by the state Department of Insurance, "so we don’t yet know what the final numbers will be," Gov. Steve Beshear said. "Changes still may occur. Rates should be finalized sometime in mid-July. We do expect that some plan rates will go down, some will go up and some will stay close to the same as last year."
Consumers will have more choices when enrollment opens, because the exchange is adding three new insurers to its individual market. United Healthcare will be offering coverage statewide, Aetna policies will be available in 10 counties, and Baptist Health Plan, now Bluegrass Family Health, will offer coverage in 79 counties. CareSource will expand its coverage area from 16 to 67 counties.
With these additions, at least three insurers will be offering Kynect coverage in every county, said Ronda Sloan of the Department of Insurance.
"When open enrollment begins this fall, Kentuckians should seek information about their individual plans, not average costs," Beshear said. "System-wide averages don’t give a good picture of what an individual’s out-of-pocket costs may be."
It is also important to keep in mind that premiums cannot be viewed in isolation, and you should look at the individual market dynamics that impact how much consumers pay for their health care coverage.
Why are most rates going up?
For an insurance company to survive, its cost of providing benefits should be less than the premiums paid for those benefits. Companies now have had more than a full year of claims data to inform pricing structures, and many insurers are finding that people who buy policies on exchanges are considerably older and sicker than anticipated, reports Megan McArdle of Bloomberg News.
As a result, insurers are incurring greater costs of providing benefits than expected. Initially, the U.S. Department of Health and Human Services said that about 40 percent of the exchange policies should be bought by people between 18 and 35, the most healthy age group, to keep the exchanges financially stable. However, according to HHS data, that group accounted for only 28 percent of the policies in 2014 and 2015.
Not only do older people have more complex and more costly health needs, rising premiums in some state-based exchanges are due in part to the uncertainty in the overall health-insurance marketplace. First, there is much uncertainty about the reform law's "risk corridor program," which was designed to have insurers share the financial risk of offering policies on Obamacare exchanges from 2014 through 2016.
The program creates a pool of money to reduce risk for insurers: Those that pay out less in benefits than they collect in premiums pay into the pool; those whose premiums don't cover the cost of providing benefits take money from the pool. However, a recent Standard & Poor's report (LINK)says the risk corridor will probably not get enough money from insurers with profitable exchange plans, so many insurers must raise premiums to support themselves.
Kentucky Health Cooperative needs shoring up
In another potentially worrisome sign, some insurers had risk-corridor receivables that exceeded half of their reported capital, and Kentucky Health Cooperative had the second-highest level of receivables as a percentage of capital: 117 percent, reports CNBC. That helps explain why it has asked for the largest average increase in premiums this year, 25 percent, and last year, 20 percent. The cooperative is one of several start-ups funded by the reform law to encourage competition in states; it sells most of the 106,000 private policies on Kynect.
Other reasons for the overall premium increases include rising health-care costs, especially for prescription drugs, Larry Levitt, senior vice president of the Kaiser Family Foundation, said on "PBS NewsHour" Wednesday night.
Speaking nationally, Levitt said state regulation means the requested premiums "will come down, in some cases by a lot." He said "Insurers are jockeying for position in these new marketplaces [so] there are some good deals to be had, but consumers really have to look around,"
David Blumenthal, president of The Commonwealth Fund, which researches health and social policy, said exchanges like Kynect "give people the ability to comparison-shop much more easily than before."
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