Insurers’ fight for customers keeps Obamacare rates down

Obamacare premiums, once predicted to skyrocket in the second year under the government’s marketplace, have risen about 6 percent for 2015, according to an analysis of preliminary state filings.

While foes of the Affordable Care Act warned of double-digit rate increases, the costs of premiums seen so far is more modest for the new year. One reason may be that insurers who came in high in 2014 found themselves beaten out for enrollments. And 77 new insurance plans will be competing for customers in 2015, according to U.S. officials.

“We made a decision several years ago that health reform is not as much a law, as it is an opportunity,” said Scott Streator, a vice president at Dayton, Ohio-based CareSource who manages plans sold under the Patient Protection and Affordable Care Act known as Obamacare.

CareSource, a not-for-profit insurer, gained almost 20 percent of Ohio’s Obamacare enrollees in 2014 by offering some of the lowest premiums in the state. Now, with enrollment set to reopen Nov. 15, the company is extending its health plans into neighboring Kentucky and Indiana.

The Affordable Care Act was designed to let insurers aggressively compete for customers within a new system of government-run marketplaces. Early results from companies such as CareSource suggest it is succeeding.

Insurers and the Obama administration have long cautioned that the new markets created by the law would take time to settle, as health plans assess their new customers and work through hiccups in their relationship with the government. The Affordable Care Act explicitly recognizes a transition period, with temporary programs through 2016 to backstop insurers’ potential financial losses.

Business opportunity

CareSource isn’t alone in its assessment of the law’s opportunities for insurers, said Ceci Connolly, managing director of PricewaterhouseCooper’s Health Research Institute in Washington, D.C.

“We’re seeing competition flourish,” she said. “Even though it’s a hassle, shopping is going to be worth it for consumers this fall.”

It’s a theme promoted by the Obama administration heading into the new sign-up period, which runs until Feb. 15. This year, about 7.3 million people are enrolled in Obamacare plans. The Congressional Budget Office predicts enrollment will jump to about 13 million in 2015.

Kevin Counihan, the CEO for the federal Obamacare exchange, healthcare.gov, is urging those who signed up last year to at least review what may be available to them in the year ahead.

“What we don’t want to happen is people not be aware of their options and default to auto-reenrollment,” Counihan said in an Oct. 1 interview.

Maryland case

In some cases, consumers will find that insurers offering the lowest-cost premiums a year ago raised their prices in 2015 to make up for it. In Maryland, for instance, CareFirst Blue Cross Blue Shield, which has the state’s lowest premiums, proposed raising its rates as much as 30 percent on average in 2015.

Kaiser Permanente and a startup, Evergreen Health, were among the priciest in Maryland’s exchange in 2014. This year they have both reduced their rates, by 14 percent and 10 percent, respectively, in an effort to gain more customers.

John Nelson, a spokesman for Kaiser, said in an e-mail that the company was able to reduce rates for 2015 in many of the states where it operates by lowering its costs, including through improved inventory management and greater efficiency at its hospitals.

Cheaper plans

Peter Beilenson, Evergreen’s president and CEO, said that many of his company’s plans will be cheaper than CareFirst’s next year.

“It was very clear to us that CareFirst Blue Cross had purposely under-priced the individual marketplace to try to take the market share,” Beilenson said. “They took a bath on it. They under-priced, they knew it, and they had to raise their prices.”

Evergreen, he said, will be “very, very competitive” in 2015. Spokesmen for CareFirst didn’t respond to an e-mail seeking comment.

Not all low-priced insurers have substantially raised their rates for 2015. In Ohio, CareSource will increase its premiums by about 2 percent a month on average.

‘Adequate solvency’

CareSource has tried to price its plans “the lowest we can get it to meet our members’ needs and still have adequate solvency,” Streator said.

The company’s actuaries credited CareSource’s benefit design as helping to keep premiums low, he said. Its plans offer features including low co-payments for routine care and free generic drugs that may help prevent pricier claims, he said. CareSource also benefited from an influx of younger customers toward the end of the 2014 enrollment period, in March and April.

That reduced the risk of its customers getting sick and needing expensive care, Streator said.

“From our early analysis, we look to be very competitive in our premiums,” he said.

In Cleveland, CareSource sells the second-cheapest silver- level Obamacare plan.

An unmarried 27-year-old paid as little as $203 per month this year for CareSource’s silver-level coverage, which carries a $3,500 deductible. Next year, the same plan will cost $207 a month, according to data compiled by ValuePenguin. That’s before any subsidies to reduce the price.

The national increase in premiums might have been even lower if the federal government had revealed insurers’ rate requests to the public, said Jay Angoff, a former administration health official.

The U.S. won’t reveal final rates agreed to by insurers and the government until just before the enrollment period opens. Angoff is suing the Obama administration on behalf of the Consumers Council of Missouri, where he was once the insurance commissioner, to release rate filings from that state.

“Rates have been much lower than either side, proponents or opponents, predicted,” Angoff said by telephone. “There are a few states, though, where they are not. Consumer groups could have gone in and demonstrated that the assumptions on which these rates are based are unreasonable.”

In the meantime, PricewaterhouseCoopers and the consulting firm McKinsey & Company have tracked 2015 rates by examining filings to state insurance commissioners, determining the 6 percent figure. The filings are still preliminary in most states.

“Our priority is to make sure consumers have the right information to choose the health-care plan that best meets their needs,” Kevin Griffis, a spokesman for the Health and Human Services Department, said in an e-mail.