Health Policy$ense

Three Questions About 2015 Premiums

As each state announces the proposed 2015 rates for each insurer on the marketplaces, it prompts a flurry of commentary about the implications for the ACA.  What do these filings mean? Here are three quick things to remember as the proposed rates are announced.

  1. Although much has changed about the individual market for health insurance because of the ACA and Health Insurance Marketplaces, that market did exist prior to 2014. Many of the cost “drivers” of health care remain in place, including prices and new technologies. Jonathan Gruber has written an excellent brief for the Commonwealth Fundoli on pre-ACA premium growth trends.  Nationally, the individual market experienced premium growth rates of 10-12% from 2008-20011.
  2. The rates being released by each state are proposed by the insurers, and are not final ones. The proposed rates will undergo different degrees of rate review and/or approval, depending on the state.  See our newest RWJF-LDI Data Brief by Scott Harrington (and me) for a quick summary of the process of rate review in each state.  DHHS set a threshold of 10% as a threshold for “unreasonable” rate increases that require justification.  Thirty-five states and the District of Columbia have prior approval authority for these rate increases. Even states without prior approval authority have a process to review rates, negotiate with insurers, and post justifications. In five states without “effective” rate review (Alabama, Missouri, Oklahoma, Texas, and Wyoming), DHHS will review the proposed rates.
  3. There can be a big difference between “average” premium increases and what most people will face on the marketplaces. As Gruber notes, weighing the data by each insurer’s market share provides a better understanding of the overall impact of the premium increase.  You can see this principle in action in Ohio, where Stephen Koff of the Cleveland Plain Dealer re-analyzes initial announcements of double-digit average premium increases.

So, as each state announces its proposed rates, ask three questions: 1) what was the growth rate for that state before the ACA [look up in Gruber’s brief; 2) what is the rate review process for that state [look up in our Data Brief; and 3) Is that a simple average of growth rates, or is it weighted by each insurer’s market share [smaller insurers will have less impact on the average person]?