Higher ACA exchange rates offer group market lessons
As evidence mounts that rates for health plans sold on public exchanges are rising higher than expected and causing large insurers to cut and run from this marketplace, brokers and advisers can glean useful information from these developments.
“Everybody is fed up with year-after-year premium increases, and so plans in the employer market are borrowing lessons learned from the exchanges in terms of ways to evolve their product designs to be more efficient,” explains Caroline Pearson, senior VP of Avalere Health, which recently analyzed insurance company rate filings for individual market exchange plans.
Chief among them: importing their own provider networks, increasing deductibles and cost sharing, and making cost transparency a priority for consumers so they can make wiser decisions about where to spend their healthcare resources.
She believes brokers and advisers have an opportunity to present some of these options to employers that may have resisted change, even “in the face of premium fatigue.” By doing so, they can also better demonstrate their value to customers. The group health insurance marketplace is becoming more proactive about purchasing positions and willing to make tradeoffs, Pearson adds.
Proposed healthcare premiums for 2017 are expected to rise by an average of 11% for silver plans in 14 states over 2016 to $503 a month, according to Avalere. The analysis included Colorado, Connecticut, the District of Columbia, Indiana, Maryland, Maine, Michigan, Nevada, New York, Oregon, Rhode Island, Vermont, Virginia and Washington. It suggests that “premium hikes are likely to cause many consumers to switch health plans.”
A major cost driver in the “quirky” individual market relative to the group side’s “minor rate increases” is the use of pharmaceuticals, observes Ron Goldstein, president and CEO of CHOICE Administrators, which also operates the CaliforniaChoice private health insurance exchange. “Someone who’s on $10,000 a month of medication is still on $10,000 a month of medication, and there’s no way to cut those costs,” he says.
Sources of stability
Since some of the roughly 20 million Americans obtaining coverage through public exchanges and Medicaid expansion since the Affordable Care Act took effect haven’t been treated in years, Goldstein isn’t surprised those costs have spiked. He thinks they could level off in the individual market after a few more enrollment cycles.
In contrast, he sees stability in the group market, which used to be saddled with 30% to 40% rate increases. “There were groups out there that would have paid to have a 12% rate increase in the past,” he says.
Virtually every day brokers ask Goldstein what can be done to control rising healthcare costs – to which he replies that there’s no real good answer yet. He’s a big believer in brokers embracing technology for more efficiently run online enrollments beyond purchasing lower premium products, mixing and matching network delivery systems, or offering supplemental products.
“I don’t think a broker, outside of some efficiencies through technology, can really help an employer drive down those costs unless they’re looking at other products that can make them buy bronze instead of gold,” he observes.
Goldstein also cautions small-group market brokers from placing too much stock in self-funded plans for their clients, which he describes as “a very specialized market” beneficial to larger groups. Another suggestion is to produce a newsletter for clients explaining why healthcare costs are rising. “Awareness is critical,” he says.