Insurance premiums to decline; or will they?

Alissa Gulin//July 19, 2013

Insurance premiums to decline; or will they?

By Alissa Gulin

//July 19, 2013

Premiums for certain health insurance plans in certain markets in certain states might be lower in 2014 than originally expected — maybe.

That wishy-washy conclusion is the best I could draw after reading a report released Thursday by the U.S. Department of Health and Human Services that federal officials lauded as a “data-driven analysis” providing evidence of the Affordable Care Act’s ability to drive down the cost of health insurance.

Other groups, however, questioned the study’s methods, the scope of data collection and whether officials’ rosy conclusion is reliable.

The report, compiled by the Office of the Assistant Secretary for Planning and Evaluation, looked at premiums proposed by insurance companies for comparable individual and small-group plans that will be offered next year — in states that made that information available. Maryland is not one of them, but more about that later.

In the 11 states (including Washington, D.C.) that made information available about the individual market, proposed premiums for next year are an average of 18 percent lower than a 2012 Congressional Budget Office projection, according to the report. In six of those states that made information available about small-group plans, proposed premiums are also estimated to be an average of 18 percent lower, compared to what a small employer would be expected to pay for comparable coverage if the Affordable Care Act weren’t in place, the report said.

Both estimates are based on proposals for premiums attached to the lowest-cost silver plan offered in those markets. Prices for all plans will be unveiled to consumers when the exchanges open for enrollment in October; plans go into effect Jan. 1.

The notion that the ACA would increase competition and transparency in the markets for health insurance has so far been “largely based on theory,” according to the report, which was compiled by HHS’s Office of the Assistant Secretary for Planning and Evaluation. But now that information about proposed premiums has been made available by some states and included in the report, officials said we have more definitive evidence.

“While further work is needed to better understand 2014 rates, the results strongly suggest that greater competition and transparency are leading to substantial benefits for both consumers and employers in these markets,” the report said.

Not everyone is convinced.

American Health Insurance Plans, the trade group for health insurers, released a series of statements in response to all the recent attention given to the ACA’s impact on premiums.

The group cautioned against assuming that the results from these states extrapolate to the entire country.

“The impact the ACA will have on premiums will vary considerably depending on a where a person lives, what coverage they have today, and their age, gender and health status,” AHIP wrote. “Simply looking at averages does not explain what these changes will mean for a particular person in a particular state.”

“When examining the impact of the ACA on premiums, it is important to consider the wide variation in impact across states,” AHIP said on its website. “According to a previous Society of Actuaries (SOA) study, “the significant state-by-state variation can be attributed to many factors, including whether or not the state sponsored a high-risk pool, differences in current underwriting practices, and demographic characteristic and income level differences in state populations.

“In simplest terms, the states that will see large increases generally have low current individual costs and those showing decreases have high current individual costs, with all states moving closer together but at a higher level overall.”

For instance, some of New York’s plans will carry premiums that are an average of 53 percent lower than current rates for comparable plans. However, the Big Apple is notorious for having more expensive health insurance than other parts of the country. That means even though the decrease is larger, it’s no guarantee the premiums are actually less expensive than those in other states.

Furthermore, it’s not clear why the report only included information from a small sampling of states. I was unable to reach the study’s authors (Laura Skopec and Richard Kronick, with the ASPE) to ask them directly (and played phone tag with HHS spokespeople Thursday and Friday), but the report says: “Information on proposed premiums in the individual and small group markets has recently been made available by selected states.”

That’s interesting. I’d like to know what they mean by “selected.”

For the past few months, officials in every state have been reviewing proposals submitted to them by insurance companies about the plans they intend to offer (and the premiums consumers would be charged) on the insurance exchanges mandated by the ACA. In the majority of states, including Maryland, that process will last at least through the end of this month. Maryland Insurance Administration Spokeswoman Vivian Laxton said the state is on track to finish by that deadline, although that’s no guarantee.

So far, only a handful of states have actually approved the submitted proposals. This report includes several states that are still reviewing them. So, then, what do the authors mean by states that “made information available”? What made the authors select those 11 states?

Could it be that insurers in those particular states had proposed, for whatever reason, the smallest premium hikes? Could it be that data from other states would not have produced the favorable results HHS wanted to see?


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