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Tuesday, July 7, 2015

Observations on Proposed Health Insurance Premium Rates for 2016

Now that insurers’ proposed health insurance premium rates for 2016 have been made public by federal and state regulators, the rate review process—where the public and consumer groups can comment—is in full swing. Not surprisingly, the highest proposed rates are garnering the most attention from the media and others. This blog describes trends in these rate increases and explains why it’s important to look at proposed rates in context. 

Some Quick Observations about Proposed Rates for 2016

Most insurers’ premium rate proposals for 2016 are now public (insurers are required to post information about proposed rate increases that are 10 percent or higher). As in past years, it’s important to remember that these are not final rates: Regulators and health plans may revise their proposed rates significantly after the public comment period. 

This year’s proposed rates are attracting attention because this is the first year that insurers are basing their proposed rates partly on data from the first year of marketplace enrollment.

Here’s what we’ve observed about proposed rates for 2016:

  • Proposed rate increases vary tremendously, even within states.
  • Some proposed rates are troubling, but it is important to look at these rates in context.

Proposed rate increases vary tremendously, even within states.

The public can now see insurers’ rate proposals for plans sold to individuals and small employers (plans sold in the individual and small group markets) in 49 states by visiting ratereview.healthcare.gov. (California insurers’ rate proposals will be posted later in July. Individual market insurers in Maine were not required to publicly post premium rates because they proposed increases lower than 10 percent.) In addition, some states make information about lower proposed increases and about insurers’ justifications for those increases available on their insurance department websites. 

We looked at proposed rates for plans sold to individuals that are “ACA-compliant,” meaning they cover the 10 essential benefits required by the Affordable Care Act (and they cover care for pre-existing conditions). These proposed increases range from less than 10 percent to a staggering 40 percent or more. 

It is important to note that in many of the states where insurers have proposed high premium increases, there are other insurers that have proposed much lower increases. Here’s the breakdown of rate increases that were posted on Healthcare.gov: 

  • No increases of 10 percent or more: In 1 state, Maine, no insurer in the individual market has proposed an increase of 10 percent or more. So, no rates are posted for individual market ACA-compliant products in Maine.
  • Increases of 10-19 percent: 43 states have an insurer that has proposed an increase in the 10-19 percent range.
  • Increases of 20-40 percent: In 26 states, the highest proposed increase is in the 20-40 percent range. However, 21 of those states also have an insurer that has proposed an increase in the 10-15 percent range.
  • Increases of more than 40 percent: 14 states have an insurer that has proposed an increase of more than 40 percent. But 9 of those states also have an insurer that has proposed an increase in the 10-15 percent range. 

Some proposed rates are troubling, but it is important to look at these rates in context.

Although some of the proposed rates are high, many consumers will have much lower increases—or they won’t have any rate increases at all. 

Advocates and consumers should keep these factors in mind when looking at proposed rates: 

  • The posted rates don’t paint a complete picture, because only rate increases of 10 percent or more are made public in most states (a few states require all rate increases to be made public).
  • A recent Kaiser Family Foundation study showed that, despite some high proposed rates, enrollees in silver plans (which is the most popular type of plan sold in the marketplace) will face only modest increases in 2016 in many communities.  But enrollees may need to shop around during open enrollment to maintain these low prices. 

    The study looked at the price of the two lowest-cost silver plans in 11 major cities. The average increase in price for the lowest-cost silver plan was 4.5 percent, and the increase in price for the second lowest-cost silver plan was 4.4 percent. However, which plans in a city were priced low changed in about half the cities, so enrollees may need to shop around to keep their premiums low.
  • These proposed rates could change significantly. Some proposed rate increases will be lowered or rejected entirely. When consumer groups comment on these proposed rates, they can urge regulators and insurers to lower them.
  • The percentage increases posted on healthcare.gov are average increases for a health care “product.” A “product” is a package of benefits that an insurer offers in a state with a set of rating and pricing methodologies. So, the posted increase is an average price increase across a number of different plans, areas, and age groups. The exact increases consumers will face depend on their age, their geographical location, the plans they choose, whether they use tobacco, and whether they receive financial assistance with paying premiums (premium tax credits).
  • When open enrollment begins again in November and plans post their final premiums, people should shop for the plan that best meets their needs and budget. If consumers find that their plan has raised its premiums, they may be able to get a better deal from a different insurer for 2016.
  • Many people receive financial help with paying their premiums (premium tax credits), and for them, the cost of coverage will still be based on their incomes and the plan they choose.

Consumers who could be affected by high premium increases should weigh in to try to reduce premiums that are unaffordable or unjustified. Learn more about specific questions that consumers and advocacy organizations should ask when challenging proposed rates for 2016