…and word on the street is that many will continue to ask for large premium increases for health insurance products offered on Obamacare’s Exchanges this coming Fall.
There are many factors explaining the prediction:
- Blue Cross and Blue Shield, one of the largest health insurers, released a study that their Obamacare customers are more costly, use more medical care inclusive of speciality drugs and orthopedic procedures, and frequent the emergency room at a higher rate compared to policyholders off the exchanges. In North Carolina, 5 percent of Obamacare individual policyholders consumed $830 million in health care costs during the first year of the law’s exchange rollout in January 2014. From that population, the carrier received just $75 million in revenue from collected premiums and funding streams (two of which are temporary) to mitigate initial market instability for insurers participating on the exchange. To date, the company has taken a $400 million hit on its ACA business.
- Those temporary funding streams, otherwise known as risk corridors and reinsurance, will go away starting in 2017. These provisions were built into the law to help offset initial adverse selection many carriers are currently experiencing with their Obamacare customer pools. Risk corridors operate where funds are shifted from plans with lower than expected claims to offset other plans where actual payments have surpassed projected amounts. Meanwhile, reinsurance acts as an insurance company’s own insurance policy, in which a fee is assessed on each person, including dependents, covered by most employer-sponsored health insurance. The fund will total over $20 billion up to 2017, and insurers can dip into this fund and be reimbursed 80 percent of a consumer’s annual claims that exceed $45,000.
- Let’s not forget that the risk corridors weren’t really all that reliable.
- The government overhaul of the individual health insurance market has made it an unsustainable book of business – even for the most established insurance carriers. UnitedHealth Group, the nation’s largest insurer, has just announced its departure from North Carolina’s exchange. As a result, the two remaining insurance companies offering plans the state’s federal Exchange (Blue Cross and Blue Shield and Coventry) will have no choice but raise premiums, since they will end up absorbing costly enrollees who were once United policyholders.