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A peek into 2015 health insurance premiums

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It seems as if we’ve had, oh, I don’t know, maybe five minutes to recover from the Affordable Care Act’s initial signup whirlwind. And now insurers are looking at 2015.

The big question is: Will premiums go up? In at least one state, the answer is yes.

The Seattle Times reports that 12 health insurance companies in Washington State are seeking rate increases for individual health plans for 2015. Washington is one of the first states to see proposed rate changes for individual health plans for next year. Rate increases ranged from 2 percent to 26 percent and would not take effect until undergoing a review by state officials.

Why the increases? Except for a few plans that were “grandfathered,” all individual plans were required to comply with provisions of the Affordable Care Act (ACA), which set certain standards for coverage and barred insurers from excluding people with pre-existing conditions.

In addition, insurers have only a few months’ worth of actual claims data, so they must use other data sources to justify rate increases, according to a spokeswoman for the Washington insurance commissioner’s office.

The American Academy of Actuaries gave a glimpse into some of the factors leading to premium increases. In an issue brief released this week, the academy explores the major drivers of 2015 premium changes, including:

  • How the actual 2014 enrollment compares to what insurers projected.
  • Whether the state allowed renewals of non-ACA compliant plans. Premiums may be higher in states that did allow renewals, especially if they had large, heavily underwritten individual markets in place prior to 2014.
  • State– and insurer-specific experience with health insurance enrollment. Enrollment outreach efforts and ease of enrollment through the insurance marketplaces may have affected the enrollee risk profile.
  • The reduction in the ACA transitional reinsurance program. The reduction in program funds, from $10 billion in 2014 to $6 billion in 2015, along with a possible increase in the enrollment in the individual market, will reduce the per-enrollee reinsurance insurance subsidy, thereby increasing premiums.
  • Insurers’ assumptions regarding how fast underlying health care spending will grow.

Washington is not the only state in which insurers are seeking rate hikes.

The National Journal reports that West Virginia also faces higher-than-average health premium increases. States in which the overall enrollment numbers were lower than expected, and where enrollees are mostly older and sicker, are more likely to see a large premium hike. Large premium hikes also are likely in states where there isn’t much competition among health insurers.

Hawaii is another state that experts are eyeing for a premium hike. Hawaii’s health insurance exchange was plagued by problems and only about 15 percent of that state’s eligible population signed up for coverage. Topping that off, Hawaii had the second-worst mix of young adults of any of the states.

Other states on the watch list for big premium increases include Ohio, Iowa and Arizona. Iowa was named as the second-worst state at enrolling residents in coverage.

A lack of competition in South Dakota is being watched as a possible reason for a potential large premium hike for 2015. When I say “lack of competition,” what I mean is that officials had a tough time convincing just one carrier to enter that state’s private market.

As the enrollment data continues to be chewed up and digested, expect more information to come out on the issue of premiums for 2015. But insurers don’t have much time to digest this information. The Centers for Medicare and Medicaid Services set May 31 as the deadline for insurers to submit their price plans for 2015. The next open enrollment season begins Nov. 15.

 

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Susan Rupe is assistant editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Connect with Susan →

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