July 04, 2015
The NYT headlined a front page piece, “health insurance companies seek big rate increases for 2016.” The piece told readers insurance companies “are seeking rate increases of 20 percent to 40 percent or more, saying their new customers under the Affordable Care Act turned out to be sicker than expected.” It then goes on to list specific instances where insurers are seeking large rate increases.
There are several problems with this story. First, it does not try to give any sort of weighting which would give a basis for the assessing the typical increase seen by people getting insurance through the exchanges. This matters both because some plans have more people enrolled than others and also because the percentage increase makes a much bigger difference for older people with high average premiums than for younger people. The average cost for a plan for people in the oldest age group (55–64) is three times as much as the average for people in the under 35 age group. If people in the latter age group see a 20 percent rise in their premiums it will imply a much smaller dollar increase than for the former group.
Since the article made no effort to assess the number of people in plans requesting large premium increases nor the amount of the premiums, there is no way to assess the increase in the premium for the typical person. The article does refer to a study by the Kaiser Family Foundation, and notes that it finds relatively small increases for the second lowest cost plan. However, it does not give readers the amount of increase found in this study and points out that to avoid a large increase it may be necessary to change plans, which could also mean changing doctors.
The Kaiser study found that the premium for the second lowest cost silver plan (the benchmark for subsidies in the exchanges) is projected to rise by 4.4 percent between 2015 and 2016 in the eleven cities it examined. It also is important to note that even staying in the same plan does not guarantee that a patient can continue to see their doctor, since doctors often leave plans.
The article also misrepresents the issue of the health of beneficiaries telling readers:
“Some say the marketplaces have not attracted enough healthy young people.”
Actually, it doesn’t matter whether people are young, it matters whether they are healthy. A healthy older person pays on average three times as much to insurers as a healthy young person and gets the same amount back in payments. Also, the losses described in this article would be largely offset by the backstops put in place in the ACA for insurers that enroll less healthy patients.
As the Kaiser report points out:
“Some of this remaining uncertainty is mitigated by the ACA’s “3 R’s” programs. These programs – risk adjustment, reinsurance, and risk corridors – redistribute risk among insurance carriers so that plans that enroll disproportionately sicker or higher-cost enrollees can be prevented from having to significantly raise premiums.”
There is a real issue here, since people should not have to be constantly changing plans to ensure that they have affordable insurance, however this article does little to indicate the extent to which this is actually a problem, although it is likely to scare many readers.
Thanks to Robert Salzberg for calling this article to my attention.
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