Plans Turn Page To 2015

With the results sure to affect politics as well as pocketbooks, health insurers are already preparing to raise rates next year for plans issued under the Affordable Care Act.

But their calculation about how much depends on their ability to predict how newly enrolled customers – for whom little is known regarding health status and medical needs -- will affect 2015  costs.    

"We're working with about a third of the information that we usually have," said Brian Lobley, senior vice president of marketing and consumer business at Pennsylvania's Independence Blue Cross. "We've really been combing the data to get a first look."

At stake are price increases that buyers on the federal exchange, healthcare.gov, and other online marketplaces will encounter when they get renewal notices later this year. Forecasting success or failure could also affect whether insurers stay on the exchanges, a key pillar of the health overhaul.

The official 2014 enrollment period closed at the end of March for most consumers. But  carriers selling medical plans on healthcare.gov must file initial 2015 rate requests with federal regulators in late May or June -- even though they have little idea about the health and potential costs of their newly enrolled members. Deadlines also loom for state-run exchange filings.

WellPoint, the biggest player in the online exchanges, is already talking about double-digit rate hikes for 2015. Such increases would give ammunition to Republican critics of Obamacare before the November elections.

Analysts' expectations vary, but nobody is predicting decreases.

"We'll see rate increases in the marketplaces, but I think it's anyone's guess" about what the precise changes will be, said Sabrina Corlette, project director at the Georgetown University Center on Health Insurance Reforms. "It's like nailing Jell-O to a wall."

The health law required insurers to accept all applicants this year for the first time without asking about existing illness. That reduces what they know about customers and raises chances they'll sign sicker, more expensive members who were previously denied coverage.

At CoOportunity Health, a nonprofit carrier in Iowa and Nebraska, many enrollees scheduled medical treatments -- including surgeries -- as soon as possible after their new coverage began Jan. 1, said Cliff Gold, its chief operating officer. Among the procedures were several expensive transplant operations including heart-lung procedures that can cost over $1 million each.

But insurers tend to receive pharmaceutical claims long before hospital bills. They are poring over these early prescription records for clues about new members' medical status.

Pharmacy-benefit manager Express Scripts published data April 9 showing that marketplace enrollees in January and February were substantially more likely than average to have HIV infections, chronic pain, depression and other high-cost ailments.

But that doesn't necessarily mean average costs will soar.

For one thing, insurers figured they would cover more sick patients this year and priced plans accordingly. Early pharmacy data at Independence Blue Cross, said Lobley, are "on par for what we expected."

Even if carriers signed more chronically ill customers this year than planned, the health law includes "reinsurance" and other safety valves designed to keep high-cost members from pushing up rates.

A sign-up surge at the end of March is another reason not to rely on early claims information.

Just as the first enrollees were more probably likely to need immediate care, insurers believe people who pushed the deadline may be healthier and younger. If so, they would balance the risk and help cover the cost of the early birds.

"It's clear that sick people were signing up" for January coverage, said David Axene, a fellow of the Society of Actuaries working with insurers to set 2015 rates. "The question now is, were the later people healthier?"

Nobody knows. While March enrollees seem to have been younger on balance, their health status remains largely a mystery.

Blue Shield of California signed more than 50,000 people the last two weeks in March.

"It's still too early to draw conclusions," said Amy Yao, Blue Shield's chief actuary. "I have the best actuarial team in the whole country. Even with that, it's less than 50 percent confidence" that they'll hit the rate-setting sweet spot for 2015, she said.

It's unclear how many of the 8 million who enrolled through the exchanges were previously uninsured. Many who did have coverage switched carriers this year, meaning their new insurers couldn't see their health histories.  

At CoOportunity Health, a start-up created with funding from the health law, every one of the 74,000 customers is new.

"It is an actuarial nightmare to try to guess what you’re going to get," said Gold.

It's not just member health that insurers have to think about. President Barack Obama allowed many people to keep old plans that aren't compliant with ACA rules. Carriers must calculate how that exception (people covered under old plans are thought to be healthier on average) affects average costs in their new policies.

Backup resources for plans with disproportionate shares of sick and expensive members will become a little weaker next year. Insurers have to factor that into their rates.

And they need to look at the big picture.  

What economists call the cost trend -- how high prices rise per procedure and how many procedures Americans get this year -- may be the single biggest variable in setting prices for 2015, experts said.

And the trend seems to be up. After several years of relatively tame increases that many tie to a sluggish economy, analysts saw medical spending accelerate late last year.

Even so, the forces affecting 2015 premiums may not drive up Obamacare prices as much as some are forecasting. Finding that insurers have gotten discounts from select hospitals and doctors, the Congressional Budget Office recently lowered its estimate for the cost of premiums and taxpayer subsidies under the health law.

"I'm not expecting double digits like some people have predicted" for 2015 rate increases, said Axene. "I'm expecting mid-to-high single digits" — somewhere from 6 percent to 8.5 percent.

That would still be far higher than growth in the economy or family incomes.

Given the uncertainties that come with a major new social law, Independence Blue Cross believes the picture won't become fully clear until much later.

"We always viewed this as a three-year plan," said Lobley. "We always thought there would be a lot of volatility in years one and two. We really thought 2016 would [bring] market stability in the individual market."

Kaiser Health News is an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health policy research and communication organization not affiliated with Kaiser Permanente.