Last year, many health insurers were predicting huge premium increases of up to 70 percent for new individual health plans created under “Obamacare” rules.
But when insurers filed their requests for rates last week with the Washington State Office of the Insurance Commissioner, something very different happened: Requested premiums were not much higher than current plans.
“Considering the dire situation the companies predicted, we’re extremely surprised,” said Stephanie Marquis, spokeswoman for state Insurance Commissioner Mike Kreidler.
Previously, the insurers blamed changes under Obamacare for their bleak forecast.
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The law requires everyone to buy insurance or pay a penalty beginning in 2014, and insurers will be required to take any paying customer.
The insurer’ predictions were based on an expectation of a flood of people with “pre-existing conditions,” including those insured by the state’s high-risk pool for people so sick that private companies had turned them away.
The insurers also worried that people who hadn’t had insurance for some time would rush out and get complex, expensive health care they’d been putting off for years, pushing insurers’ costs upward.
For a number of reasons, insurers have revised their calculations.
However, the insurance commissioner’s office hasn’t begun to review the rates, which it could challenge as too high — or too low, if it appears insurers have artificially lowballed rates to gain market share.
Both insurers and regulators cautioned that an apples-to-apples comparison with current rates is difficult, at best. These are entirely new plans, most with more benefits and different out-of-pocket amounts and limits than the old plans.
And whether an individual will pay more or less than they pay now, or than plans now on the market, will depend on many factors, including the makeup of their previous plan, their age and whether their income qualifies them for a federal subsidy.
Individuals making up to $45,960 and families of four making up to $94,200 a year will be eligible for subsidies if they buy their plans through the new online marketplace exchange created by the federal law.
These new individual plans, which will be available this fall and take effect in 2014, cover a much wider range of benefits than most current individual plans.
The new plans must cover 10 “essential health benefits,” including items rarely covered now by individual plans, such as prescription drugs and maternity and newborn care.
The new rules limit out-of-pocket costs in most plans to $6,350 for individuals and $12,700 for families, including deductibles but not premiums. The plans can no longer have annual or lifetime coverage caps for essential health services.
In an attempt to quantify the changes, the insurance commissioner’s office looked at the most popular two plans now offered by LifeWise Health Plans of Washington, a Premera Blue Cross subsidiary that offers the top-selling individual plans in Washington.
To compare current and new plans, the insurance office considered not just premiums, but deductibles and cost-sharing.
It concluded that for most adults who are now either uninsured or who hold an individual plan, the out-of-pocket costs with similar new plans would be about the same as plans now offered.
Young adults, though, may get hit with significantly higher premiums.
But state planners estimate that over 50 percent of 18-24-year-olds will qualify for tax credit subsidies or state Medicaid under the law, which would reduce the premium for plans they buy inside the exchange. In addition, those under 30 will still be able to buy high-deductible, catastrophic-coverage plans.
Inside the exchange, insurers offer three levels of plans with different cost-sharing arrangements: “gold” plans pay 80 percent of medical costs, “silver” plans 70 percent, and “bronze,” 60 percent.
For plans offered by four major insurers, here is the range of monthly premiums in King County filed by four major insurers:
• $166-$279 for a 21-year-old, single non-tobacco user;
• $212-$356 for a 40-year-old single non-tobacco user;
• $451-$757 for a 60-year-old single non-tobacco user.
The highest premium rate level requested was $997 per month for a 60-year-old smoker in a “gold” level Regence BlueShield plan with dental and vision care and an individual-assistance component.
To compare current plans with these new plans, analyst Jim Keogh with the insurance office compared the two current LifeWise plans with two new plans at the silver and bronze level the company said it expected to be the two most popular.
Keogh compared not just premiums, but all out-of-pocket costs from deductibles and cost-sharing that would be expected, on average. The insurance commissioner’s office notes that many individual plans today cover only 40 percent to 50 percent of costs overall, with the purchaser picking up the rest.
For a 40- to 44-year-old in very good to excellent health, the popular LifeWise WiseEssentials 6 ($1,970 deductible) plan now costs $3,680 per year in premiums. Average out-of-pocket costs of $1,170, Keogh calculated, would bring that person’s total annual cost of health care to $4,850 per year.
For the roughly comparable new LifeWise silver plan, while the annual premiums are slightly more ($3,972 per year), the out-of-pocket costs would be considerably less ($743), making the total $4,715.
The current Lifewise plan with a $3,500 deductible is about $140 per year more expensive in total costs than the most comparable new bronze plan.
Seniors in good health would actually save a small amount of money on new
silver plans, compared to similar current plans.
But for 21-25-year-olds in good health, both levels of the new plans were more expensive — the silver plan was $60 per month higher, while the bronze level was $48 per month higher.
What made the insurers change their tune?
In a nutshell, said Premera spokesman Eric Earling, changes and clarifications in federal rules and new actuarial figures showed Obamacare wasn’t going to raise costs as drastically as insurers had predicted.
In addition, changes in risk-sharing arrangements among health plans helped “level the playing field a bit,” by lessening the financial risk to any one company of taking on less-than-healthy people, he said.
Earling and other insurers cautioned, however, that individual people may see their rates rise.
“The rate impact varies,” he said. “And whether you are eligible for a federal subsidy is going to have a huge impact.”
Some analysts predict that premiums will rapidly rise in the future after insurers readjust rates based on costs incurred in 2014.
Insurers, Earling said, want to make sure insurance is affordable. But when medical costs rise, so will premiums.
“The ultimate issue in addressing cost is addressing the rising cost of medical services,” he said.
Carol M. Ostrom: firstname.lastname@example.org or 206-464-2249. On Twitter @costrom