Some big rate hikes in health insurance

The New York Times observes the state of the health insurance market:

Health insurance companies across the country are seeking and winning double-digit increases in premiums for some customers, even though one of the biggest objectives of the Obama administration’s health care law was to stem the rapid rise in insurance costs for consumers.
Particularly vulnerable to the high rates are small businesses and people who do not have employer-provided insurance and must buy it on their own. 

In California, Aetna is proposing rate increases of as much as 22 percent, Anthem Blue Cross 26 percent and Blue Shield of California 20 percent for some of those policy holders, according to the insurers’ filings with the state for 2013. These rate requests are all the more striking after a 39 percent rise sought by Anthem Blue Cross in 2010 helped give impetus to the law, known as the Affordable Care Act, which was passed the same year and will not be fully in effect until 2014.

Group plans are averaging 4% increases, according to the Times.

The California filings are easily accessible online. I’m a p/c actuary, not health, but I did rummage through the Anthem Blue Cross filing requesting +26%. (A 700-page download of the filing is here.)

Health actuaries have always told me the trick in setting health prices was getting loss trends right, because they overwhelm other factors. This filing, for example, assumes 10.9% annual trend, or a bit less than 1% a month. 

I also note the comments section that accompanies each filing. Some cris de coeur:

  • This exhorbatant and unjustified excessive increase can not be allowed!!! You stopped them the last time they tried this. PLEASE STOP THEM THIS TIME. People can not afford these increases. They are trying to increase my policy $117 a month to $700/mo. This is just awful. They can not be allowed to do this. This is greed plain and simple
  • How can they ask for a 20% increase? Already they have been granted 8%,9%, and 13% increases in previous years. This is a tremendous burden on the consumer already. They should never be allowed to raise rates more than 5%, and the average rise should be no more than 2-3% per year. In the last 3 years, we have had the equivalent of 10 years of rate increases.
    This is clearly price gouging and must stop now!
  • Request fro 25% increase is outrageous and unafordable. I had to swithch from HMO to PPO with largest out of pocket now there is nowhere elde to go. I am getting $166 a month increase. I am 61. 
    At a time when increase in medical costs has been historically low this request is an outrage. PLEASE STOP IT. WE HAVE HAD ENOUGH.

These increases are all in the individual market. I can sympathize. I have an individual plan, and a separate plan for my family. Together they cost more than $16,000 a year.

And they go up at least $500 a year because the rate ratchets higher as one ages. Using the Anthem rate cards as a guide, one’s rate can rise more than 60% in the last decade leading up to age 65.

I can’t tell you whether Anthem’s increases are justified. I can tell you, however, that President Obama always put insurers front and center in his litany of bad guys in the health care game.

You can read about it at the campaign’s web page, which is still up. Here are the first two sentences: 

Obamacare is making health care work better for all of us, even if you already have insurance. It puts the health of your family first—ensuring access to free preventive care and protecting consumers from insurance company abuses.

Boldface is mine. I’ve written before about Obama’s tendency to blame insurers for high health costs while ignoring other players in the marketplace. The bashing is incredibly short-sighted. To work, Obamacare needs insurers to impose cost controls on providers. By making insurers the bad guys, he strengthens the forces that want costs to continue to rise.

But the Times article hints that some other guys might be wearing black hats, too:

Many insurance regulators say the high rates are caused by rising health care costs. In Iowa, for example, Wellmark Blue Cross Blue Shield, a nonprofit insurer, has requested a 12 to 13 percent increase for some customers. Susan E. Voss, the state’s insurance commissioner, said there might not be any reason for regulators to deny the increase as unjustified. Last year, after looking at actuarial reviews, Ms. Voss approved a 9 percent increase requested by the same insurer.

“There’s a four-letter word called math,” Ms. Voss said, referring to the underlying medical costs that help determine what an insurer should charge in premiums. Health costs are rising, especially in Iowa, she said, where hospital mergers allow the larger systems to use their size to negotiate higher prices. “It’s justified.”

Atop this all is the medical loss ratio requirement – if an individual plan runs a loss ratio under 80%, policyholders get a refund. From that perspective, it’s impossible for an insurer to overcharge. At the end of the year, he gets a refund. The Anthem filing I looked at projected an 83% medical loss ratio.

With all this, it may soon be time to suggest that medical services cost more money because the people who administer medical services – doctors, hospitals and drug companies – keep raising their prices.

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