Across the nation, ObamaCare health insurers are proposing double-digit rate hikes. Tennessee’s three remaining health insurers on the state exchange are following suit.
The Tennesseean recently reported that Cigna, Blue Cross Blue Shield and Humana all proposed double-digit rate hikes for individual and family health plans. Blue Cross proposed the largest rate hike of an average 62 percent premium increase. Humana follows suit with an average 29 percent premium increase while Cigna proposes an average 23 percent increase.
Why the Rate Hikes?
Tennessee residents are sickly.
Blue Cross Blue Shield CEO JD Hickey recently wrote an article in the Tennessean titled, “Striving to make the health care marketplace model work.” In his article, he pointed to a nationwide study Blue Cross Blue Shield conducted among its members.
The study analyzed the claims data of its 2015 Marketplace members against the Blue Cross Members who obtained health coverage through their employers. Per Dr. Hickey and the Tennessean, BCBS marketplace members were more likely to have:
Higher rates of chronic conditions, including diabetes and cardiovascular disease.
42 percent higher rates of inpatient hospital admissions, with 15 percent longer average stays
14 percent higher rates of emergency room utilization
67 percent higher rates of behavioral health visits
WBIR is the ABC affiliate located in Knoxville, Tennessee. The news outlet cited data from Blue Cross showing that the health insurer saw increased amounts of major congenital heart disorders (52% increase) and end stage renal disease (31% increase) among its members. Click here for the full article.
These are national statistics, of course. Hickey says Blue Cross Blue Shield of Tennessee’s experience has been similar.
Low Turnout for Younger Health Insurance Consumers
Health insurers want more young, healthy people in the risk pool. Young, health insurance consumers are less likely to get sick or injured; therefore, more money comes into the pool, and less claims must be paid. This is the idea.
Health insurers participating in the Tennessee exchanges were hoping for more young, healthy consumers to buy health insurance. Females in the 18-34 age group only represented 26% of total enrollments; males of the same age group represented 30% of enrollments.
Hickey was quick to point out that the “young invisibles” who bought marketplace health insurance had high volumes of claims.
Insurers hoped for more young, healthy people to enroll in health plans on the Tennessee exchange. This was a measure to prevent rate hikes. It backfired.
Will the Rate Hikes Stop?
Rate hikes will stop once the marketplace becomes sustainable. Health plan members are making too many claims, and monthly premiums from members do not cover the claim costs. Blue Cross data shows that current Marketplace members averaged 31 claims in 2015. Those who have Blue Cross coverage from an employer averaged 24 claims in the same year.
Many Republican legislators favor the “repeal and replace” method when discussing the Affordable Care Act. Rate hikes seem to be just another argument in favor of dismantling the country’s health law. However, there are other GOP lawmakers that favor keeping the law and implementing smaller changes. Three quick fixes from the Republican Party could help ObamaCare insurers acheive better financial health.
A Push Toward Sustainability
Rate hikes may not be the only answer to help health insurers find sustainability on the exchanges. Here are three measures Republican lawmakers proposed to reduce the sizeable losses of ObamaCare health insurers.
Shorter Grace Periods for Members
Health insurers are sometimes getting a raw deal. Normally health coverage is contingent upon a customer making his premium payments every month. Now, ObamaCare health plan customers have a 90 day grace period–customers don’t have to make payments every month to enjoy the benefits of the health coverage. A customer could easily file an expensive claim during this time, and the health insurance company loses money in more ways than one.
Republican lawmakers wish to only allow a 30 day grace period.
Up-front Proof for Special Enrollment Periods
Outside of Open Enrollment, Americans must have a Qualifying Life Event to enroll in health coverage. Major life events, such as having a baby and getting married, trigger Special Enrollment Periods where folks can enroll in health coverage to account for life changes. Little proof of one of these events is required during the enrollment process.
This is not to say that all 900,000 people who enrolled in coverage gamed the system post Open Enrollment. There is a good chance, however, that many used a false event to gain false eligibility. Requiring up-front proof allows for less health insurance gains under false pretenses.
More Expensive Premiums for Older Members
Older health insurance customers are more prone to having a higher cost of care. Conversely, younger health insurance customers are less prone to higher costs of care. Health insurance companies may charge older customers higher premiums for the higher health costs, but there are limits.
Under the Affordable Care Act, health insurers are allowed to charge their older members premiums costing three times the amount of younger customers. Republican lawmakers wish to allow health insurers to charge older members premiums costing five times the amount of younger customers.
Other Ways to Offset Rate Hikes
The Risk Corridors Program came to be as the Affordable Care Act was signed into law. The program was designed to pool profits from ObamaCare health insurers to pad the losses of other insurers who lost money. The problem is that very few health insurers made money; thus, payments were very light to offset losses. Plus, the federal government changed the rules to pay less. More money from the Risk Corridors Program could help lower premiums, and two large insurers have filed lawsuits against the federal government to recoup some of their missed Risk Corridors payments.
The Obama Administration is also trying to force young, healthy insurance customers onto Qualified Health Plans. Short term plans are an inexpensive alternative to purchasing a QHP, for premiums are considerably cheaper, and these customers have minimal health needs. Short term plans will still be available, but a person may only buy a short term plan for three months with no option to renew. Government officials hope this move will force more healthy people into Marketplace risk pools, for there is less potential for expensive claims if the risk is spread out among healthier consumers. Currently, short term plans are keeping healthier consumers from buying Marketplace plans. Short term plans are not Qualified Health Plans, and those enrolled in short term plans will pay a tax penalty.
Americans must pay a tax penalty each year for not having health insurance. The fee is a marginal one, for Americans without qualifying coverage will owe $695 or 2.5 percent of annual income to the IRS. This money is subtracted from a perosn’s annual income tax return. Raising the penalty significantly would motivate more people to buy qualifying health coverage.
Rate Hikes Aren’t the Only Solution
Health insurance premiums increase every year, and the increases won’t slow down until health insurers make money on the exchanges. The Affordable Care Act is not perfect–many changes need to be made to the law to curtail losses. Still, 20 million Americans gained health coverage despite the flaws of the Affordable Care Act. Rather than scrap the law, lawmakers need to enact changes helping Americans and health insurers gain at the same time.
Many Americans will feel the pain of high premium increases. Many other Americans will still have access to affordable health coverage, for premium levels may still be low with tax credits. One easy way to gauge future health insurance costs is to use this calculator. For more information on the rate increases, read this article to hear Blue Cross Blue Shield of Tennessee’s side of the story. Finally, you can call us! We help you fill out your Marketplace application to help you find your true tax credit!
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Philip Strang never envisioned a career in the health insurance industry before October 2015. He fell in love with the industry instantly, and his goal is to make health insurance simple for you. Feel free to write him at firstname.lastname@example.org. Comments are encouraged!
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