Changing Insurance Industry in Open Enrollment Season

Insurance industry changes continue under Affordable Care Act

Thousands of Americans are again searching for health insurance during the open enrollment period for the Affordable Care Act.

Many are just doing cost comparisons, others are searching because their health cooperative, set up under the Affordable Care Act, is closing. One thing all of those looking have found to be true, those seeking health policies with the most freedom are finding far fewer of those plans on the insurance marketplaces and the premiums for those plans are rising faster than for other types of coverage.

A Dozen Health Co-Ops Fold

Health insurance co operatives were supposed to shake up the traditional marketplace by being member-owned and nonprofit. But in that start up phase many found it was tough to figure out how much to charge. Some ended up setting low prices and the customers poured in.

Unfortunately, it turned out many of these new customers had costly medical conditions, so when co-ops had to start paying their bills, the math didn’t add up. On top of that, co-ops were counting on a variety of funding streams from the federal government, and some of that money never materialized. Of the 23 health co-ops that opened in 22 states with the advent of Obamacare, just 11 are still in business.

Co-ops Hurt by Failure to Approve Federal Subsidies

Julia Hutchins, Colorado’s HealthOP’s CEO, which initially captured 40 percent of the individual market on the state’s exchange, says their co-op got walloped after the federal government said it wouldn’t be paying co-ops millions in subsidies that she and others expected.

HealthOP’s senior IT manager Helen Hadji, a Republican, says she blames conservatives in Congress for not authorizing the money needed to keep the cooperatives afloat. “This is a federal failure,” Hadji says. “This is all a political battle to dismantle Obamacare.”

Slower Growth Was Key To A Connecticut Co-Op’s Success

In Connecticut, a story from the other end of the co-op spectrum is playing out. While Colorado saw an early surge in membership because of low prices, Connecticut’s co-op nearly priced itself out of the market in its first year, charging rates that were much higher than its competitors. For 2015, HealthyCT only got 3 percent of the state’s business under the Affordable Care Act.

Ken Lalime, who runs the co-op, faced the same problem other co-ops faced nationally. He didn’t know who his customers would be, didn’t know whether they’d be sick or healthy and didn’t know how much to charge. In the end, his co-op charged too much.

However, even though that meant relatively few sign-ups in year one, the slow start actually helped. The co-op didn’t have a huge number of claims to pay immediately, and those that it did pay didn’t break the bank.

In year two, HealthyCT’s average premiums were more competitive — and the co-op went from a 3 percent share of the market to 18 percent. For 2016, its initial premium request came in high; it subsequently revised that number to be much lower, and the state overseers eventually announced that HealthyCT’s premiums will go up 7 percent. So for now, HealthyCT is holding its own one of the 11 co-ops, of the original 23, that is still in business.

Premiums Rise Faster For Flexible Health Plans Than For HMOs

Flexible health plans, usually known as preferred provider organizations or PPOs, pay for a portion of the costs of out-of-network hospitals and physicians. They are the most common type offered by employers, and some consumers in the individual marketplaces find them more appealing than health maintenance organizations and other policies that pay only for medical facilities and doctors with whom they have contracts.

A Kaiser Health News analysis of costs in the three-dozen states selling policies through the federal website found a sharp difference in premium prices between plans that offer out-of-network care and those that don’t.

The analysis compared the monthly premiums for the least expensive silver-level plans — the category that are the most popular purchases — for a 40-year-old in each county.

While the average premium for the least expensive closed-network silver plan — principally HMOs — rose from $274 to $299, a 9 percent increase, while the average premium for the least expensive PPO or other silver-level open access plan grew from $291 to $339, a 17 percent jump, KHN found. The cost variations hold true for any age.

The price gap between PPOs and HMOs is growing in many places where both are offered. In Chicago, the least expensive silver PPO next year will cost $270 a month, $75 more than the least expensive silver HMO, and 27 percent more than the cheapest silver plan costs now. Meanwhile, the price of the least expensive silver HMO in Chicago is dropping by 12 percent.

In Salt Lake City, the premium for the only silver PPO is rising by 30 percent, nearly four times the increase for the least expensive HMO.

In Philadelphia, the cheapest silver PPO will be $389, $113 more than the cheapest HMO. This year, Philadelphians wanting a silver open-access plan had to pay just $66 more. As in many places, insurers also are selling different bronze, gold and platinum PPOs (the metals indicate how the insurer and patient divide the cost of care), but the cheapest plan in each tier in Philadelphia is an HMO.

In Houston, the only plans available through the federal exchange have closed networks. Blue Cross Blue Shield of Texas, which offered a PPO plan in Houston for 2015, cited rising costs as a reason it will not offer any open-access plans next year. There is at least one PPO that consumers can purchase directly or through a broker, offered by the Memorial Hermann Health System. But it isn’t listed in the federal marketplace offerings, so premium subsidies aren’t available.

Plans with out-of-network benefits are not disappearing everywhere. Alaska, Arkansas and Wyoming are bucking the trend by only offering PPOs. Out-of-network costs even with PPOs can be prohibitively expensive because many PPOs will cover only a minority of costs, diminishing the difference from HMOs. Also, people who qualify for government premium subsidies can be insulated from the full cost of a PPO.

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