Health insurance rate increases at 10-year low

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Many people are putting off elective procedures until the market picture clears.

When it comes to health insurance rates in 2013, there’s good news and bad news.

The good news is that insurance premiums will rise at their lowest rates in more than a decade. The bad news: Rates still are climbing faster than inflation, and faster than any other commodity including gasoline.

This year, the average Colorado health plan rate increase is 7.4 percent, lower than previous years’ double-digit increases, and lower than 2012’s rate increase of 9.4 percent, according to the Lockton Co.’s annual employer benefits survey. In 2011, the average rate increase was 14.4 percent.

The lower increase in premiums is because more Coloradans have high-deductible health insurance policies, says Bill Lindsey, CEO of Lockton. About 53 percent of companies reported medical plan deductibles of $1,000 or more, higher than the national average of 34 percent and higher than last year’s 46 percent. About 81 percent reported deductibles of $500 or more.

The still-weak economy plays a role too, he said.

“People are bearing more of the costs themselves, meaning that with high deductible plans — $1,000 or more — the insurance carriers are paying out less,” he said. “And with the soft economy, people are putting off elective procedures, things that can wait, are still waiting.”

But consumer advocates believe that the lower rate increase is a trend that will continue under the Patient Protection and Affordable Care Act, popularly known as Obamacare.

“There’s no other way to explain the drop,” said DeDe DePercin, executive director of the Colorado Consumer Health Initiative, one of several groups working to create the Colorado Health Benefits Exchange. “Some people might say it’s the economy, but that doesn’t explain the size of the drop — that can only be explained by provisions in the act.”

One of those provisions brings negative publicity to insurance companies — it requires that companies publicly announce rate increases of more than 10 percent, causing many to keep premium increases below that benchmark.

“We’ve seen increases of 9.99 percent,” DePercin said. “So we really do think that’s having an effect.”

National rates

Colorado’s insurance increase is much higher than the national average of 4 percent for 2013, Lindsey said, a troubling aspect of the industry in the state.

DePercin’s group is working to bring Colorado’s rate increases in line with national averages. They’re doing that, she says, by taking advantage of state law.

“State law says that anyone can weigh in on a proposed rate increase,” she said. “Only no one ever does it. Most of the information behind a rate increase is available publicly, so we started looking at increases and commenting on them.”

The process is complex and cumbersome; so far CCHI has only commented on three proposals, said Matthew Veleta, CCHI’s health policy fellow. It’s won in two cases, and in the other, it was shown the insurance company was actually losing money on the plan and had to raise rates.

“But that information wasn’t publicly available,” Veleta said. “We’re working to make sure there’s more information available to people.”

CCHI would like to see Colorado follow Oregan’s lead — requiring public hearings for each rate increase. Instead, the public can request information whenever a company requests a rate change, and then comment on that change. The Division of Insurance is required to take those comments into consideration when it decides whether to approve the increase.

Consumers should take note of the ever-increasing cost of health insurance, DePercin said, and make use of the wide swath of public information available about health costs and insurance rates. They’re paying for it, she said. The Lockton survey shows that employers will pass at least part of the rate increases onto employees. In 2013, that will come in the amount workers will pay for premiums through payroll deductions.

That’s where the Colorado Health Benefits Exchange comes in. DePercin believes it will stabilize the small group and individual marketplace, typically less regulated than the large-group market.

But the group putting together the exchange has to tread carefully.

“We’re breaking new ground,” DePercin said. “The thing about Colorado is so frequently we’re so far ahead of everyone else that we don’t have any examples to follow. We’re going to be that example.”

Fully insured plans

In the meantime, companies are uncertain about the health care overhaul, the major aspects of which will go into effect in 2014. Many are responding by dropping full insurance and opting instead for self-insured medical plans, Lindsey said. For the first time, the number of companies offering fully insured plans dropped from 58 percent to 46 percent.

“It’s a significant change,” he said. “And it’s in the mid-sized, small companies, those with fewer than 500 employers. And that tells you two things: that they’re trying to find ways to reduce the cost of employee health insurance and that they’re uncertain about reform.”

The survey shows that more companies are interested in self-funded plans, where the company sets aside money to partially pay for employees’ health care needs, usually done in concert with an insurance plan.

The trend increased to almost 39 percent of employers reporting they self-funded their medical plans in 2012, up from 32 percent in 2011.

But the move out of traditional health insurance markets can mean trouble for the industry as a whole, Lindsey said.

“From a public policy standpoint, companies with older, sicker workers won’t self-insure,” he said. “Only companies with young, healthy employees can take that risk. So it leaves the insurance market with older, sicker workers to insure and to bear that risk. That’s going to drive costs up. It might be good in the short term for companies, but it isn’t good for society as a whole.”

Top employer concerns

  • Plan cost increases
  • Compliance with federal and state legislation
  • Employee dissatisfaction with plan
  • Medical plan quality
  • Provider quality
  • Managing privacy and security issues

(Source: Lockton Co.)

How insurance rates are approved:

  • Carrier submits premium rate filing change requests.
  • Within 30 days, Division of Insurance posts information to website and emails to consumers who have asked to be notified of rate changes.
  • Division of Insurance determines if file is complete within 30-day period.
  • DOI has to tell carriers of deficiencies in the filing within 45 days.
  • DOI reviews rates and comments to make sure the increase is justified.
  • By 60 days, the DOI decides rate change and posts decision online.

(Source: Colorado Consumer Health Initiative)