Payers Scramble to Set 2015 HIX Premium Rates

The clock is ticking and insurers operating on the new public health insurance exchanges have just two months to gather data on 2014 enrollees to help guide decisions on business plans for 2015.

With Monday's grinding close of the 2014 open enrollment period, insurers offering individual health insurance policies on the exchanges are pivoting their attention to setting rates and benefit products for 2015.

The final day of enrollment was frustrating for consumers and payers alike as the Healthcare.gov website was offline for several hours because of an apparent software problem and high volumes of users.

But now that all applications have at least been started in the system, payers' attention turns to the next phase. In the Final 2015 Letter released by CMS on March 14, the qualified health plan application submission window is set between May 27 and June 27. Between now and the end of June, insurers will be pouring over enrollment and claims data, as well as assessing market factors present in exchanges state-by-state, to craft their insurance policy offerings for 2015.

"Insurers are already moving to learn as much about their new customers as possible," Ceci Connolly, managing director of Pricewaterhouse Coopers' Health Research Institute, said Friday. "They want to know about any existing health issues, but also try to determine what problems might be looming on the horizon. In this particular demographic, multiple chronic conditions are possible and the major challenge will be managing those efficiently."

Factors Already in Play
While it likely will take weeks for federal and state officials to release key beneficiary data from the exchanges such as age distributions, actuaries and others crunching the health insurance policy numbers for 2015 have already identified several factors they will have to take into account.

As Connolly noted, there is a widespread assumption that the 2014 beneficiary pool on the new exchanges will have a disproportionately high number of unhealthy people compared to subsequent enrollment years. This assumption is based on the reasonable expectation that pent up demand for medical services among the previously uninsured will prompt those individuals to be among the first to sign up for individual coverage on the exchanges.

"I would bet that many of the first million people who enrolled were people with pre-existing conditions who couldn't get coverage before," said Tammy Tomczyk, senior principal and consulting actuary at Oliver Wyman Consulting Actuaries in Milwaukee.

As insurers look toward setting premium rates and benefit packages for 2015 and beyond, the percentage of enrollees with pre-existing conditions is expected to decline, she said. "As we add [more beneficiaries to the exchanges], we're not going to be adding more of those people because they'll already be in," Tomczyk said.

A 'Bifurcated Market'
Another major factor already in play for 2015 rates and benefit packages is the Obama administration's decision to allow states to let individuals keep their health insurance policies outside of the exchanges as long as the end of 2016. Most states took the feds up on the offer, while more than a dozen, including Colorado, will be requiring individuals to purchase health insurance on the exchanges in 2015.

The states that have allowed individuals to keep health insurance policies off the exchanges through 2016 are running the risk of creating a "bifurcated market," Tomczyk said, noting young policy holders have little incentive to give up existing coverage that often has premium discounts based on age.

If insurers had known federal officials were going to allow "transitional policies" to stay in place through 2016, carriers would have set their 2014 premium rates higher, Tomczyk said. "The rates would have been higher than we saw," she said. "And we wouldn't have seen the likely jump in 2015 that we are going to see."

In Colorado, state exchange officials are predicting a major impact from the requirement for individuals to purchase health insurance through Connect for Health Colorado next year. The year "2015 will be a whole different world," exchange CFO Cammie Blais said last week.

Consumers Key Players
Fostering consumer education is seen as essential to establishing efficiency, stability and predictability on the exchanges.

"During the last few weeks, more people have been contacting Humana with questions about their coverage options under the Affordable Care Act. We've also seen an increase in traffic at our ACA educational events," said Alex Kepnes, director of corporate communications at Humana.

"Humana's approach throughout ACA enrollment has been to provide clear, basic education so people can make well-informed decisions about their health care coverage options. The more informed people are, the more empowered they are to make the right choices about their health needs."