Close to 45,000 Louisiana policyholders could see the rates for their health coverage jump anywhere from 10 percent to nearly 20 percent next year, and the state’s largest insurer says the Affordable Care Act is a major reason.
Blue Cross and Blue Shield of Louisiana accounts for the bulk of those individual policies, which people buy directly from an insurance company rather than through their employer.
Three of the four companies in Louisiana offering policies through the new online federal marketplace are asking for rate increases that top 10 percent for certain plans.
While those policies make up a relatively small chunk of the total sold in Louisiana, the proposed rate increases are steep enough to stir debate over whether the Affordable Care Act — commonly called Obamacare — will help rein in the costs of health care and insurance as promised. Policies covering about 102,000 people in Louisiana were obtained through the online marketplace.
Blue Cross spokesman John Maginnis said the Affordable Care Act expanded access to health insurance to millions of Americans, regardless of age or health status, and guaranteed richer benefits. Those things come at a cost, he added.
Blue Cross offered the most options and plan choices, and made those policies available in every parish. As a result, Blue Cross also absorbed the majority of the risks in Louisiana under the Affordable Care Act, Maginnis said.
“We are now covering more people who have more complex medical needs, and the costs of providing health care to our total customer base have gone up,” Maginnis said in a prepared statement.
The claims for several of Blue Cross’s individual plans were greater than the premiums being paid, which means those plans are losing money, Maginnis said.
Jonathan Gruber, an economics professor at the Massachusetts Institute of Technology and a consultant on the Affordable Care Act, said rate increases need to be considered in the context of what was happening before the Affordable Care Act. Nationally, the individual market was showing yearly rate increases of 10 percent to 12 percent. Meanwhile, employers who provided coverage to workers were seeing rates rise about 8 percent annually.
Gruber said rates also varied widely by insurer. Some companies cut rates while others increased rates by more than 50 percent.
“So what I think we are seeing here from Blue Cross is consistent with the pattern in the market before the ACA,” Gruber said.
It’s hard to say what effect the Affordable Care Act is having, Gruber said. What may be happening is a market correction as insurers who underbid during the first year make adjustments. In 2014, rates nationally were generally well below what was expected.
“We may need a few years of rates to draw any strong conclusions,” Gruber said.
Cori Uccello, a senior health fellow with the American Academy of Actuaries, said the difference between what insurers expected to happen in 2014 and what actually took place may be a major driver of rates. Companies had to make a number of assumptions, including who their customers would be, their age distribution, health, and whether they would be low- or high-cost customers. Those numbers are baked into the 2014 premiums.
Insurers have already had to calculate their 2015 rates with only a few months of data to draw upon, Uccello said. While companies have a good handle on demographics, the information on medical spending is limited. But there may be enough for insurers to say some policyholders are spending more than expected and to adjust for that, Uccello noted.
In Louisiana, rates may also be rising on other individual plans, just not as much. Under the Affordable Care Act, only increases of 10 percent or more must be filed with the state Department of Insurance for approval, so smaller rate hikes go unreported.
In addition to Blue Cross, the other companies seeking double-digit increases for some plans are Humana Health Benefit Plan of Louisiana, Time Insurance Co. and Louisiana Health Cooperative, according to filings with the Insurance Department. The requested increases would affect policies in seven different health plans, and those policies cover more than 60,000 people. Only Time Insurance did not offer coverage through the federal marketplace in 2014.
All of the plans comply with the coverage requirements set by the Affordable Care Act. Policies offered on the federal marketplace must also be offered off of it. But only people who buy coverage through the marketplace are eligible for government subsidies that are based on income and family size.
Gruber said the proposed rate hikes probably wouldn’t raise costs much for people who qualify for subsidies because premiums are still set as a percentage of a person’s income.
“It is only those buying unsubsidized — a minority — for which these costs matter,” Gruber said.
The Insurance Department will review the proposed rate increases to make sure the premiums and the assumptions — such as the estimates of future medical claims costs — are reasonable. It plans to complete the reviews by mid-October.
Some of the companies seeking rate increases cited reasons other than the Affordable Care Act.
Louisiana Health Cooperative wants increases of about 10 percent for two plans covering a total of about 1,650 policyholders, saying a “key contributor” to the rates is the reduction in payments from a federal program that pays insurers more for taking on higher-risk consumers, such as those with chronic conditions.
In its rate filing, Humana said high-cost medications and increased use of new drugs, including those designed to fight Hepatitis C, are among the major reasons for the higher premiums.
Clare Krusing, a spokeswoman for the industry group America’s Health Insurance Plans, said premium costs are driven by a wide array of factors.
“I think what’s important, especially when you consider premiums, is there is no sort of national story,” Krusing said. “In terms of what premiums are going to look like, that’s going to vary depending on what’s happening in the state.”
U.S. Health and Human Services officials say competition in the online marketplace, increased enrollment and premium-stabilization programs should help moderate rates. The Congressional Budget Office estimates that marketplace enrollment will double from 2014 to 2015, with new enrollees likely to be healthier than those who bought coverage during the first year.