Early Exchange Outlook 2015

Ceci ConnollyStates in more than half the nation have reported individual market premium rate requests for 2015, making this an opportune time to assess how the second year of the ACA’s new marketplaces is shaping up.

With rate filings in for 27 states plus the District of Columbia, the early word on 2015 appears to be expansion. At least 15 of the 28 jurisdictions in 2015 will offer new individual plans this year. Thirty-seven of the 176 health plan filings are new, according to analysis by PwC’s Health Research Institute (HRI).

Major national insurers such as UnitedHealth Group, as well as newbie Consumer Operated and Oriented Plans (Co-Ops), plan to add both products and states when exchange open enrollment begins in the fall. In Virginia, five new plan bids have been submitted to the state; Washington, Arkansas and Tennessee show three new plans each.

UnitedHealth’s CEO Stephen J. Helmsley estimates that UnitedHealth will sell on public exchanges in about two dozen states. In short, the ACA’s subsidized exchange markets represent growth opportunities for the health sector.

At the same time at least three non-profit health Co-Ops will move into additional markets. As of late April, Co-Ops operating in 23 states had 400,000 members, according to the National Alliance of State Health Co-Ops. Not every Co-Op drew big numbers, especially those in states such as Maryland, where the online marketplace never really got off the ground. And it’s far too early to say how many new entrants will be left standing as plans are forced to pay back $2 billion in federal loans over the next several years.

In terms of cost, our HRI analysis found the average monthly premium across all plans in 2015 was $384, before any subsidies are applied. Individuals earning up to 400% of the Federal Poverty Level, or about $47,000 this year, are eligible for government subsidies. Last year individuals who purchased coverage through the federal exchange saw their out-of-pocket premium costs drop by about 76%, from $346 to $82 per month with tax credits, according to the Department of Health and Human Services.

The premium rate proposals, which must be approved by state insurance commissioners, range from a 23% reduction (Arizona) to a 36% increase (Nevada). Overall the average proposed rate increase is holding steady at 7.5%, well below the double-digits many feared. (Click here for an interactive 50-state HRI map.)

Importantly insurers have factored in additional costs for 2015, such as a higher industry fee (up from $8 billion this year to $11.3 billion) and a lower federal reimbursement rate for reinsurance of high-dollar claims.

California, the largest state in the nation with 1.4 million enrollees in 2014, is reporting a weighted average increase of around 4.2%. Officials note that some plans have proposed average rate decreases of 8.5%.  Anthem Blue Cross, which has about one-third of the California market this year, has said it requested an increase of less than 10%, but many Blue Cross Blue Shield plans in other states are seeking double-digit increases.

In New York, another closely-watched state, officials recently announced a weighted average rate increase of 13% in 2015. Newcomer Oscar, a technology-based insurer, proposed a 5.5% rate increase for 2015. Arizona has the lowest premium filing so far, at $211 a month. The District of Columbia, with an unusually large percentage of gold and platinum shoppers (think lawyers, lobbyists and members of Congress) has posted an average rate request of $352.

Among states that have reported actual premiums, Indiana holds the dubious distinction of having the highest average premium rate, at $514, and the highest average increase at 15.4% for six plans. It is also the only state so far with a requested monthly premium above $600. (Note: Louisiana’s posted 19% average increase appears to be the highest, but the state is only reporting requests above 10%).

Colorado has the widest range of rate proposal requests across 12 different carriers:  from a 22% reduction to a 35% increase. Proposed premiums range from $288 to $529, with an average of $411.

Let’s just say, it pays to shop around.

Ceci Connolly is the managing director of PwC’s Health Research Institute.

Caitlin Sweany is a senior manager at PwC’s Health Research Institute

25 replies »

  1. Carol,
    Sorry to hear about that. Our data is averages for each state. We are seeing wide variation. It is super important for you to shop around again this year as there’s a good chance you can find a better deal. The exchanges are set to open this Friday, Nov. 15 — Feb. 15.
    Good luck!

  2. Could you be wrong about AZ rates? Today (10-27-14) I received notice that my 2015 rates will increase by 31% from the 2014 rate. The insurance company did not indicate if the deductible of $4,600 would also increase, but I probably should assume it will. I am a non-smoker.

  3. Your article has the note: (Note: Louisiana’s posted 19% average increase appears to be the highest, but the state is only reporting requests above 10%).

    As far as I can tell – this 19% increase that is being trumpeted by the republicans here came from a single insurer. This seems awfully dishonest. Any further info on Louisiana? Thanks

  4. First movers will be employers with large percentage of low-wage workers, eligible for subsidies — assuming the subsidies withstand legal challenges and perhaps Congressional action.

  5. Good piece in CapitalNY, especially the chart. Another good read from @citizencohn via The New Republic. Of course, state insurance commissioners will get their say in the next few months and we really won’t have a strong sense of this market for a few more years.

  6. Are the individuals adequately informed of what the HIE is and does that refusal come with a stigma attached?

    On another note remember that water and data are very similar in certain respects. Man can drown in both.

  7. I’m told that individual insured members can opt out of the HIE if they’re concerned about privacy issues.

  8. Yes, each the insurance and risk passageway programs can end in a very few years. confine mind, however, that insurers square measure (or ought to be) actively designing for these phase-outs

  9. Thanks for your comments. I can only listen to them without comment because things are in such flux, but the underlying principles being used IMO will increase cost/benefit. Government intervention doesn’t have the boundary lines seen in the private markets.

    Another thing that troubles me is the ease with which the California Information Exchange seems to have in its implementation. There doesn’t seem to be much concern for patient privacy.

  10. allan,

    I don’t have a good answer for you on the outlook for health insurance premiums in CA. My guess about the cause of the large premium increases experienced by some individuals in the CA individual insurance market is that much of it resulted from more comprehensive coverage required to comply with the mandated benefits package and some may relate to the 3 to 1 limit on age rating.

    For insurance policies purchased through the new exchanges, Wellpoint, on its 2nd quarter earnings conference call, pronounced itself satisfied with its performance so far. It noted that the members who bought policies toward the end of the open enrollment period were generally younger and healthier than those who bought policies earlier and that, in the first year, new members generally have a medical cost ratio about 500 basis points (five percentage points) higher than established members. Their claims experience overall was consistent with what they priced for. Wellpoint, at the moment, expects the 3 R’s to have no net impact on the company meaning that the amount they expect to collect will be roughly offset by what they’re required to pay in. Humana, by contrast, is likely to be a net receiver of funds from the 3 R’s. Cigna, for its part, does not view the exchange policies as sustainable based on their experience so far. United is only participating in four states this year but plans to be in about two dozen next year. So, time will tell.

    The biggest potential driver of future premiums, I think, will be medical trend which has always been the case. To the extent that insurers can find ways to drive cost out of the healthcare system, including through value based contracts, bundled pricing, reference pricing and the like, premium growth should be mitigated. Just today, the WSJ published an article about the formation of a Health Information Exchange to be launched by a joint venture between Anthem Blue Cross, a Wellpoint subsidiary, and Blue Shield of CA that will contain health records for 9 million members. Projects like this have the potential to help doctors, especially ER docs, provide better patient care.

    I don’t know what the impact on insurance premiums will be from phasing out the reinsurance and risk corridor programs. What I do know is that if insurers cannot earn their targeted pretax profit margin of 3%-5% on exchange policies over time, they won’t sell them.

  11. That’s a good point. We do expect to see some movement from employers into the public exchanges over the next few years, especially as rates stabilize.

  12. Yep, it’s true that the new plans in VA did replace the older ones — they are new bids, however. Insurers are clearly switching things up a bit this year.

  13. Yes, both the reinsurance and risk corridor programs will phase out in a few years. Keep in mind, however, that insurers are (or should be) actively planning for these phase-outs, so my guess is that they’re already factoring those in — at least in part — to exchange premiums.

  14. Barry, when discussing total healthcare costs we have a tendency to break things up and then report those things that look favorably or unfavorably on the program based upon our bias. You have done a good job here of centering the expectations. But, in this report we are dealing with the exchanges where it seems you feel that the % increase in California is not reflective of the actual cost.

    While reading this blog I am reminded of an LA Times article the other day dealing with premiums outside of the exchanges.


    I don’t have any way to put all the numbers together. What do you think is happening to the total healthcare premium in California when putting all the markets together and adding in those expenditures that are temporary and keeping some premium costs down?

  15. Interesting.

    If the trend continues and there is more suppleness in the individual market, it might get those covered by ESI to take more notice.

    Alternatively, they may be two insurance tiers that are not supposed to meet.

  16. Is there any data around how much the health insurance industry will collect this year from the 3R’s – risk adjustment, reinsurance and risk corridors vs. how much it will collectively pay into the system? Except for risk adjustments, I think this program phases out by the end of 2016. As noted, the industry tax will increase 40% in 2015. With pretax profit margins in the 3%-5% range at best, significant rate increases may be necessary over the next few years to make the exchange business sustainable.

  17. I wonder about the “five new plans” in Virginia. There’s a company called Innovation Health (partnership of Aetna plus Inova hospitals) that is not renewing any of its 2014 plans, according to its filing with the state — but is staying in the exchange and offering a new batch of plans. If the “five new plans” are just the replacements for the 2014 plans, then I’d say Virginia is staying put, not expanding. Hope I’m wrong, but just FYI.

  18. Yes, in fact we’ve done research at HRI showing that public exchange premiums (pre-subsidy) are comparable to — and in some cases lower than — employer-sponsored insurance. http://pwc.to/1qNRy2t

    Employers have to consider mandate penalties, recruitment/retention, etc. when deciding whether to send employees to the public exchanges. Not a clear-cut decision for many.

  19. That seems substantially less than ESI, which begs the question why are more people not jumping on to the exchanges, or will they; or is there a catch?

  20. While we can’t say for sure what will happen with rates in California, keep in mind that insurers are basing their premiums on a variety of factors. Early analysis on the health/spending patterns of the newly insured, changes to fees and other programs under the ACA, etc. — all go into those calculations.

    California also already employs an “active purchaser” model, meaning the state does have sway over how much an insurer can raise its rates. Other states such as Washington also use the active purchaser model.