Who Knew?: Big ObamaCare Insurers Signal Big Premium Hikes

5/18/2014

ObamaCare premium proposals for 2015 from two states Monday revealed a potentially troubling trend: Big exchange operators are seeking the biggest hikes.

Some news outlets say that the early data implied that premium hikes would be modest.

Molina Healthcare (MOH), with 2,000 enrollees in Washington, aims to cut premiums by 6.8%. Kaiser Foundation Health Plan seeks just a 0.6% rise. But those carriers account for just 3% of state's combined enrollment.

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Meanwhile, Group Health Cooperative filed for an 11.2% rate increase for its nearly 24,000 exchange enrollees, about 16% of Washington's total.

Weighting proposed rates by the size of the exchange operator suggests an average 8.8% hike.

Early evidence from Virginia shows a similar trend. 

WellPoint (WLP) wants an 8.5% hike for its Anthem HealthKeepers plan, while CareFirst Blue Choice has proposed a 14.9% increase. By comparison, Kaiser Foundation is seeking just a 3.3% rate bump.

Virginia Trend Similar

While good data aren't available for Virginia on how many exchange enrollees each plan has, Kaiser operates in just four of the 95 counties. Including non-exchange plans, Anthem covers 110,000 Virginians vs. 32,000 for CareFirst and 10,000 for Kaiser.

It's too early to draw broad conclusions based on two states' incomplete data, but Washington's in particular do offer some insight. Washington reports only the enrollment of those who have made an initial payment.

A check of exchange pricing shows that in King County,which includes Seattle, Group Health offers a silver plan 10% cheaper than Molina's. Further, Molina doesn't appear to offer a bronze plan.

For 2015, both carriers are making big adjustments. Molina seems to be getting serious about competing for customers, while Group Health has apparently found its pool of insured to be riskier than expected.

That shows the potential upside of a competitive exchange. While the rate changes reflect a state average that will differ from county to county, it's possible that Molina may match, if not underprice, Group Health if they stick to their proposals.

Meanwhile, four more insurers have submitted proposals to sell plans on Washington's exchange. They would bring 2015's total to 12.

Competition Limited

Yet exchange competition may still be limited in much of the U.S. Today, more than 1,000 counties have only one or two insurers on the exchange.

Virginia and Washington also had a relatively high share of young adult sign-ups. Other states with riskier demographics may see bigger rate hikes.

Individuals and families who qualify for ObamaCare subsidies based on income will be shielded significantly from large premium increases. But the Congressional Budget Office projects that unsubsidized enrollees will jump from about 1 million this year to 3 million in 2015.

Big rate hikes could jeopardize that projection, though the uninsured will have to weigh higher premiums against a higher individual-mandate tax penalty. The penalty will jump to 2% of adjusted income above the tax threshold, from 1% in 2014.

Higher premiums could also push more young adults to opt for catastrophic plans. That would hurt ObamaCare's main risk pool because they are effectively placed in a different pool.

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