Exchange health insurance premiums in 2015 – the real story

Shockingly, there’s a good deal of confusion out there regarding what will happen with health insurance premiums in 2015, more specifically what’s going to happen in the Exchanges.

Let’s leave aside (for now) the possibility that we’ll have another enrollment mess like we experienced last fall (CMS officials are likely still twitching over that disaster…).  Instead, here’s what we know now.

1. Health insurers are pretty much guessing what the P&L on their Exchange business will be; there’s just not enough data, many didn’t fully enroll until late spring, and individual health plans’ enrollment is too small to be statistically valid (in many cases).
2. So, they are pretty much guessing what their rates for 2015 should be.
3. Some very big players – notably United Healthcare – didn’t participate in Exchanges last year, but will be this fall.  In some instances, their rates are very competitive, in others not so much.
4. The number of insurers participating and the number of plans they are offering in most exchanges is either level or increasing slightly.
5. A quick check of rates (thank you Kaiser Family Foundation) in a number of markets indicates prices for the benchmark Silver plans are decreasing by about 1 percent on average.
6. As Bob Laszewski pointed out in a recent blog post, many of the insurers that were the benchmark Silver plans in 2014 will not be benchmark plans in 2015 – either their prices went up or in some cases they may actually have decreased – either way they no longer qualify to be the benchmark plan (the second cheapest Silver plan).
7. Bob’s point – and it is certainly valid – is that the federal reinsurance program essentially protects Exchange insurers from significant losses.  No wonder the number of plans participating is increasing.
8. With that said, from a pure pricing standpoint, 2015 consumer insurance prices declined in a number of markets, and in those where they did increase it was in the single digits.

We won’t know if that will continue for a couple of years, when the federal reinsurance program expires.  The hope is market dynamics, competition among insurers, increased experience with narrow networks, ACOs, and other cost saving mechanisms is able to drive down costs and the federal program is no longer needed.

What does this mean for you?

Consumers love low rates.  Health plans that figure out how to keep them low are going to win big.