Health Insurance Report™ helps you track and analyze legal, legislative, and regulatory developments affecting the health-insurance industry throughout implementation of the Affordable Care Act...
By Sara Hansard
May 13 — Health plans will be asking for higher rates for 2016 to compensate for higher-than-expected costs in 2014, a Blue Cross and Blue Shield Association executive said May 13.
“2014 costs for health plans were higher than what were expected,” Kim Holland, BCBSA director for state affairs, said at a conference on health insurance exchanges. While health plans anticipated a “significant” population of enrollees with unmet medical needs, “many underestimated the number of young people that would not enroll, and so what we've seen is higher costs overall,” including unexpected numbers of very high-cost procedures such as transplants, she said.
“Those plan costs were higher and those are expected to play out in higher rates. We're starting to see that now as plan filings are becoming public, and that is likely to continue,” Holland said. Further, she added, it's unlikely for 2014 or 2015 that plans will receive much from the Affordable Care Act's “risk corridors” program to compensate plans for losses.
There are “unrealistic pressures” on health insurers to keep premiums low while keeping all doctors in plan networks, preserving low cost-sharing requirements for enrollees and covering broad benefits, Holland said.
“It just can't work that way,” she said. Nevertheless, “we're seeing an increasing number of mandates” on coverage approved by state legislatures, as well as “great pressure to limit copayment and other types of techniques insurers and pharmacy benefit managers use” to try to control expenses, Holland said.
“That contributes to concerns about solvency,” Holland said. “There's a lot of attention paid to insurance company reserves—and oftentimes we think it's too much—and inadequate attention paid to inadequate reserves.” Reserves, which are regulated at the state level, are needed to cover insurers' financial risks, she said.
Recently it was publicly revealed that Blue Shield of California had its state nonprofit status revoked Aug. 28, 2014, a status it held for 70 years. The company is appealing the Franchise Tax Board's decision.
Among the complaints against Blue Shield by consumer advocates was its actions in recent years to increase rates while holding large cash reserves. At the end of 2014, the company reported $4 billion in cash reserves, which is 1,300 times more than the amount required by state regulators, Consumer Watchdog Executive Director Carmen Balber told reporters March 18.
While ACA mandates increase cost pressures, health-care costs are going to come down, “whether you like it or not,” the chief executive officer of New Mexico Health Connections told the Health Insurance Exchange Summit. New Mexico Health Connections was set up with government loans under the ACA's Consumer Operated and Oriented Plan (CO-OP) program.
The U.S. can't afford continued health-care cost increases, “and there's going to be a point at which large employers and other people say `no more,'” Martin Hickey said. “The question is are we going to do this in a rational way—in the American way—through competition, or are we going to have some sort of crazy legislation that screws up the whole system.”
Reducing cost in health care is “very frightening” for many stakeholders, Hickey said. “Someone's ox is going to get gored, if not everyone's, and that's something that we all still have our head in the sand about.” Collaboration between health plans and providers is necessary, he said.
Hickey defended the ACA CO-OPs, although two have failed, including one in Vermont which the state refused to license, and CoOportunity Health, which served Iowa and Nebraska and which was liquidated. “Many of the other CO-OPs are doing extremely well,” he said.
The “big unknown” is how well the ACA risk adjustment programs will work, Hickey said. Legislation signed in December 2014 by President Barack Obama contains provisions limiting payments under the ACA's risk corridors program. The program has come under attack by some congressional Republicans as a “bailout” for insurers.
However, “If you read into the bill pretty thoroughly, there are still pots of money that the government can get to for the risk corridors,” Hickey said. “There will be money left over for the reinsurance pool,” another risk adjustment program created by the ACA, he said.
In December 2014 actuarial firm Milliman Inc. issued a brief saying that the Department of Health and Human Services may be able to make payments to insurers under the risk corridors program by adjusting temporary reinsurance benefits in the individual market.
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