Over the past month, insurance regulators in all 50 states have been scrutinizing health insurers proposed rates for the 2016 plan year. Some of the details are starting to trickle out, and the news for price conscious consumers, particularly health insurance exchange consumers, isn’t looking too good. Various state regulators and insurance carriers are reporting requests for very high rate increases, particularly in the individual market due to high loss ratios in those products. In many states, price increases are being requested in the 30-50% ranges. Some of the biggest rate increase requests include an average increase of 51.6% in New Mexico, 36.3% in Tennessee and 30.4% in Maryland. Many state's rate requests are unknown because the rate filings are not publicly accessible information.
Why so high? First of all, the exchange clientele has been risky and unpredictable for many issuers, and operating in the exchange marketplace isn’t cheap either. According to the Wall Street Journal, “BlueCross BlueShield of Tennessee...said it lost $141 million from exchange-sold plans, stemming largely from a small number of sick enrollees. ‘Our filing is planned to allow us to operate on at least a break-even basis for these plans, meaning that the rate would cover only medical services and expenses—with no profit margin for 2016,’ said spokeswoman Mary Danielson.”
Also, with the uncertainty of King v. Burwell looming, due to rate filing peculiarities in various markets, some carriers have had to hedge their bets against adverse selection right up front. Other states will allow for revised filings should the health premium tax credit subsidies in federally facilitated exchange states be disallowed by the Supreme Court this summer.
The news isn’t necessarily all bad for consumers either. So far, Indiana, Connecticut and Maine insurance departments report very low average increase requests. Furthermore, the rate process is only at its beginning. In addition to the current look-see by state regulators, the Department of Health and Human Services (HHS) will also examine state rates, and adjustments will likely be made between now and early October, when all exchange contracts must be finalized.