Many insurers setting premiums for the upcoming exchange season seem to be banking on consumer price sensitivity. Some are also poised to draw the most cost-conscious enrollees away from competitors.
Premiums for 2015 benchmark silver individual exchange plans have fallen by an average of 0.8 percent in 16 cities over the past year, according to an analysis by the Kaiser Family Foundation.
Researchers at the Kaiser Family Foundation examined rate filings for all insurers in 15 states and the District of Columbia and focused on the large cities, as a way to gauge the year-over-year increase or decrease for benchmark silver plans.
The 0.8 percent decrease basically means on average premiums are holding flat, although even low single digit increases would be progress for consumers, after a decade's worth of healthcare inflation and commensurate increases in individual and group premiums.
Premiums for the benchmark plans are increasing in 9 of the metropolitan rating areas examined, including Nashville, Portland, Oregon and Richmond, Virginia. But it's notable that premiums in so many other markets are decreasing, such as in Hartford, New York City, Portland, Maine, and Seattle.
(Source: Kaiser Family Foundation)
This should be good news for consumers buying on exchanges for the first time. For consumers who enrolled in a plan last year and for insurers looking to boost market share, it may also be good news -- if those consumers are willing to shop around. In 12 of the 16 cities studied, at least one of the insurers selling one of the two lowest-cost silver plans in 2014 is no longer offering a low-cost silver plan in 2015.
"While the tax credits may cushion the effect of premium increases, subsidized enrollees could still face large premium increases if they are enrolled in a plan that is no longer a low-cost plan and they fail to switch during open enrollment," write Kaiser Family Foundation senior policy analyst Cynthia Cox and colleagues.
Take Denver. On average premiums are falling by 15 percent compared to last year, but changes in which insurers are offering the lowest-priced plans could create a big reason for consumers to switch plans or otherwise expose them to price increases, according to the study.
For the current 2014 plan year, Humana offered greater Denver's second-lowest-cost silver plan, priced at $250 per month for a 40-year-old. For 2015, Humana lowered it's premiums for that plan by a dollar -- but a competitor, Colorado Health Insurance, is going lower and selling a silver plan for $211.
That means subsidized enrollees in Humana's plan will be paying more each month unless they switch. A 40-year-old Denver-area resident making $30,000 pays $209 per month for Humana's current silver plan, with government subsidizing the other $41. To keep that monthly premium, the resident would have to switch to the Colorado Health Insurance plan (they'd pay $208). But if they keep the Humana plan, they'll pay $208 plus the difference -- totalling about $246.
Similar situations will be common in the 12 cities Kaiser found with a low-cost insurer raising its premiums more than other carriers, or where a new insurer is entering the market with a lower premium. That scenario is also likely to play out in other markets.
It's one of several potential dangers insurers are facing in year two of the insurance exchanges.
After the many technology problems in last year's open enrollment, members in exchange plans may be drawn to auto-renewal. But then they could find rising premiums due to changes in the benchmark plan.
In many cases, according to estimates by Milliman, exchange enrollees will get a better deal if they go through the determination process and choose the benchmark plans -- creating tension for insurers between auto-renewing members and educating them about their options to insulate them from price shocks.
"Pricing uncertainty combined with consumer price sensitivity will likely result in the exchange being more volatile for insurers relative to their traditional lines of business for many years to come," as Milliman actuaries Paul Houchens and Susan Pantley warned.