Tag Archive: individual market

Anthem Blue Cross: California individual managed care plan market shrinking, necessitating higher premiums

The California Department of Managed Health Care (DMHC) is questioning the reasonableness of a May 1 rate increase Anthem Blue Cross will be taking for 120,000 individual managed care plan members.

DMHC sent a letter to Anthem Blue Cross asking for an explanation for the rate increase and why it is higher in comparison to indemnity-based insurance products with similar deductibles. DMHC regulates managed care plans in the state.

In an April 25 letter in response to DMHC, Anthem Blue Cross states its individual managed care plan pool is shrinking. The letter strongly implies adverse selection requires it to boost rates to keep up with losses incurred by those members remaining in the pool who tend to use high levels of medical services. Anthem Blue Cross projects it will incur a medical loss ratio of 88.5 percent for individual managed care products for 2011 after a 16 percent rate hike and increased deductibles effective May 1.

See the conclusion section on page 7 of Anthem Blue Cross’s letter.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Interim High Risk Pool could speed depopulation of individual market

By the time individuals become eligible to buy coverage through the Patient Protection and Affordability Act’s (H.R. 3590) American Health Benefit Exchanges on Jan. 1, 2014, the individual market risk pool could undergo a major depopulation particularly among individuals with pre-existing conditions.

According to a Kaiser Family Foundation survey released this week of people with individual coverage aged 18-64 conducted between March 19 and April 2, annual premium increases are averaging about 20 percent.  Given that individual rates are already high and remain headed upward in a weak economy, such increases are unsustainable and will likely be seen in retrospect as the tipping point of market failure in the individual health insurance market. Individuals can only trade down so much before premiums for a higher deductible, less generous plan also become unaffordable.  Sixty five percent of the Kaiser Family Foundation survey respondents reported they worry their premiums will rise out of reach as do 81 percent of those with medical conditions.

If premium rates for the Act’s Interim High Risk Pool provide even modest relief, it could spark a migration of those with preexisting conditions out of the individual market into the Interim High Risk Pool.  The pool took effect this month and is intended to provide coverage for those with preexisting medical conditions who have been uninsured for at least six months until insurers must accept all applicants in 2014.  It remains to be seen exactly what members of the pool will be charged for coverage.  While the Act requires the pool to set premiums at a “standard rate for a standard population,” those premiums may also end up being unaffordable as I’ve previously speculated.

Nevertheless, individuals with medical conditions may soon be knocking on the pool’s door as this item from the New York Times Prescriptions blog illustrates.  In the blog post, Deborah Chollet, a senior fellow at Mathematica Policy Research, suggests a self employed individual with cancer who fears he’ll no longer be able to afford rising premiums may wish to consider the pool as an alternative to dropping his coverage.  But under the Act, he’ll have to go medically uninsured for six months in order to qualify for coverage.

There’s another aspect that bears watching.  If the premiums charged in the Interim High Risk Pool are significantly lower than those charged by health plans and insurers in the individual market or lag their recently sharp premium hikes, it could produce a so-called “crowd out” effect in which individuals drop coverage for six months in order to qualify for coverage in the Interim High Risk Pool.  Many — probably most people over age 45 — would meet the Act’s expansive definition of a pre-existing condition.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Reform legislation seeks to buttress individual market as employer-based coverage erodes

When President Obama took office last year and declared health insurance reform as a top domestic priority of his administration, he affirmed it would preserve employer-based coverage.  He rejected calls for a Canadian-style single payer system, branding it too radical and disruptive.

Nevertheless, the reform legislation that could come up for a final vote this month in Congress implicitly acknowledges an erosion of employer paid health care coverage in the United States.  It does with a focus on buttressing the individual market as an alternative for those who don’t get coverage through their jobs.  While this market segment currently covers only about five percent of the working age population, that number is likely to grow as more small employers stop providing health coverage to their employees.  The legislation lacks an “employer mandate” requiring small employers — defined as those with 50 and fewer employees — to slow that trend.

Instead, the reform bill appears designed to prop up the individual market, buttressing it as an alternative for those without employer-based coverage.  It does so by expanding the risk pool with a mandate that everyone but the very poor have coverage and requiring individual insurers to take all applicants including those with pre-existing medical conditions.

Individual insurers will have a larger number of insureds to share the risk and generate premiums. But they will also have sicker people in the pool with costly chronic conditions like diabetes they can no longer turn away.  The question going forward if the reform bill is signed into law is whether that approach is actuarially sustainable given continued projected increases in medical care expenditures and whether premiums can remain affordable even with subsidies.  It’s a critical question given the Obama administration’s reliance on the individual market to fill the coverage gap created by a shrinking small employer group insurance market.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

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