Across the country, insurers are beginning to propose premiums for the plans they will offer on the health insurance exchanges — online marketplaces for individuals to compare and purchase policies — due to open for enrollment Oct.1. CareFirst’s move indicates major insurance companies will not shy away from proposing large premium hikes — and placing the blame on the new federal regulations.
On Tuesday, Maryland became the third state to unveil health insurers’ proposed premiums under the Affordable Care Act. Insurers in Vermont and Rhode Island have proposed smaller increases.
CareFirst, which provides insurance to 70 percent of Marylanders with individual policies, said the rate increase is necessary because, under the law, it can no longer refuse coverage to people with preexisting medical conditions. The company expects a huge influx of sick people that will drive up costs, according to its filings with the Maryland Insurance Administration.
“The biggest driver of the increase is opening up the market to all comers,” said CareFirst CEO Chet Burrell. “The premiums reflect that.”
Health law supporters have called foul, contending that the proposed increase overestimates the cost of new enrollees.
“The rate increase is based on worst-case scenario assumptions,” said Tim Jost, a law professor at Washington & Lee University. “They’re really predicting dramatic increases in use of services across the board.”
Carolyn Quattrocki, executive director of Maryland’s Office of Health Reform, which oversees implementation of the federal law, expects the state insurance commissioner to look closely at the assumptions used by insurers in coming up with proposed premiums.
“Even before now, it has been a lengthy and involved process,” she said. “This year, [insurance commissioner Therese M. Goldsmith] is geared up for an even higher scrutiny of these plans because of so many changes to the landscape. She anticipates even more back and forth negotiations over these assumptions.”
Maryland is among the 31 states that has authority to deny rate increases, giving regulators the final say over whether health law changes justify the premium boost.
“I’m sure we’ll discuss this at great length with the regulators,” Burrell said. “In the end, they can decide to approve a rate. We will certainly make our views known on this.”
Analysts say CareFirst’s request is not surprising. Insurers have long been warning of “rate shock” as plans raise premiums to make up for the cost of adhering to strict new federal guidelines, though critics say the insurers are exaggerating the problem. (The proposed increases wouldn’t apply to employer-provided health coverage.)
Health law supporters argue that generous tax subsidies, which limit how much low- and middle-income Americans must spend on premiums, will shield many from the increased cost of individual policies.
Sarah Lueck, senior policy analyst for the liberal Center for Budget and Policy Priorities, also said that while some premiums might increase, enrollees would most likely get a plan with more benefits.
“For a healthy person, there has to be a larger discussion about what are you buying for your money and why you’re better off buying health coverage,” she said.
But Scott Gottlieb, a physician and a resident fellow at the conservative American Enterprise Institute who consults with health-care companies, said many purchasers prefer the bare-bones plans because they are cheaper.
He noted that states with fewer regulations than Maryland, such as Kentucky and Alabama, could see their rates shoot up even more to meet the federal requirements.
“I think that 25 percent will end up being around the median,” he said.
Health and Human Services Secretary Kathleen Sebelius has acknowledged that, for some Americans, rates will probably increase under the health law because it requires insurers to cover a more robust set of benefits.
“These folks will be moving into a really fully insured product for the first time, and so there may be a higher cost associated with getting into that market,” she told reporters last month.
More than 770,000 people in Maryland are uninsured, or about 13 percent of the state’s population, according to the most recent Census data available.
Older CareFirst subscribers may see their premiums decrease as the health law limits how much insurers can charge their oldest members. Younger and healthier Marylanders may see premium hikes of as much as 150 percent.
“The younger you are, the higher the likelihood your rates will go up,” Burrell said.
Other health insurance plans proposed significantly smaller premium increases. Kaiser Permanente, which will sell nine health plans in Maryland next year, proposed an average increase of 4.3 percent. Its rate filing makes no mention of the federal health law’s mandated changes.
Health plans Aetna and Coventry did not specify anticipated rate increases in their filings. Aetna did, however, identify the health law’s requirement to cover new benefits and to stop excluding people with preexisting conditions as two factors “driving” their proposed 2014 premiums.
Maryland will also have two new health plans enter its market in 2014, Evergreen Health Cooperative and All Savers.
Rhode Island’s largest insurer requested a 15 percent increase — the same bump it would have pursued regardless of the Affordable Care Act.
CareFirst and state officials are now girding for intense negotiations over whether the proposed rate will move forward. Maryland is among the 31 states that has the authority to deny rate increases, giving regulators the final say over whether health law changes justify the premium boost.
“I’m sure we’ll discuss this at great length with the regulators,” CareFirst CEO Chet Burrell said. “In the end, they can decide to approve a rate. We will certainly make our views known on this.”