Anthem Blue Cross California rate hike for grandfathered individual plans points up adverse selection risk

In the Anthem case, these are “grandfathered” policies purchased prior to the 2010 federal health law being enacted. They don’t comply fully with the Affordable Care Act, but consumers can hold on to them as long as they don’t make major changes in deductibles or other benefits.

Jones said Anthem’s practice of imposing hefty increases year after year suggests that the company wants to push these customers into newer policies “with narrower networks and potentially less access to medical providers.”

The insurer attributed the rising premiums to an aging customer pool “because new younger, healthier members are not able to sign up for grandfathered plans.”

via Anthem rate hike excessive for 170,000, regulator says – LA Times.


The last sentence tells much of the story from Anthem’s perspective. Grandfathered plans — those that were in place when the Patient Protection and Affordable Care Act was signed into law in March 2010 — are separately pooled and not part of the single statewide risk pool put in place under the Affordable Care Act’s reforms of the individual and small group health insurance markets. They are also known as non-ACA compliant plans.

Since younger adults who are entering the reformed individual market aren’t being included in the grandfathered plans, their lower expected medical utilization can’t aid in the spread of risk for grandfathered plans and potentially subjects those plans to adverse selection risk. As the Los Angeles Times article reports, California’s insurance commissioner has a different perspective on the rate increase.


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