Insurer premiums in the second year of public exchanges look financially wise to credit experts, although there are also some double-edged swords.
So far, insurers in at least 10 states have had their premiums published for the upcoming plan year, with many increasing rates moderately and some by more than 10 percent. Among nine states studied by Avalere Health, average premiums for silver plans at the 40-year-old age band are poised to increase 8 percent over last year, from $324 to $350.
This trend is earning positive ratings from credit agencies, according to Steve Zaharuk, Moody's senior vice president.
"The rate increases reflect an increasing medical cost trend that we expect will grow at an annual rate of 5 percent to 6 percent, an increase in the Affordable Care Act industry fee and continued anti-selection owing to regulatory changes that allow individuals to maintain non-compliant plans for another year," Zarahuk wrote in a briefing.
With most insurers are projecting that the first year or years of exchange policies will lead to small losses or neutral profit impacts, the premium increases -- modest but not insignificant -- suggest "that insurers have chosen to protect earnings margins rather than push membership growth," he wrote.
While there are some insurers that are decreasing rates compared to last year, such as in the crowded Oregon exchange, and a few offering what federal or state regulators may deem unreasonably high increases, premiums are converging.
"2015 is likely to have less variance among premium rates than apparent on the exchanges this year," Zaharuk said.
That type of standardization is coming along with more competition. In the first open enrollment period, 13 states had more than seven insurers selling exchange plans, 11 states had three, 10 states had two and two states had only one, Zararuk noted.
This year, there's going to be more in most states that had only few, and some states will be highly-competitive. UnitedHealthcare, for one, is expanding after only selling in five state exchanges last year. In Washington, United will be one of four newcomers. Another new entrant, Harvard Pilgrim is going to begin selling plans in New Hampshire and Maine's exchanges.
"Because the products on the exchanges are standardized, more competition would result in less membership growth potential for each insurer," Zarahuk wrote.
There is of course the chance that insurers will get a mix of membership with risk profiles that bring financial turbulence -- and the risk adjustment programs could be somewhat skewed, researchers have found -- so "less membership, and therefore less risk, is credit positive," Zarahuk concluded.
The new ratings system is also subject to some turbulence, with 35 states having some kind of prior approval regulatory process for insurance premiums. Under the Affordable Care Act, CMS reviews any rate increase greater than 10 percent (and reviews individual rates in five states with limited oversight), although it cannot reject a rate increase, only publicly deem it to be unreasonable, which carries some stigma.