From the Desk of Bob McNett….
Individual Exchanges in Turmoil while Employer-Sponsored Health Plans Show Stability.
The Exchanges (also called Marketplaces), which are the website-based marketers of individual health insurance created by the Affordable Care Act, continue to be in a state of great turmoil. As open enrollment season begins, premiums for 2017 coverage have greatly escalated, in many states, for policies offered by participating insurance companies.
While the majority of policyholders that receive income-based government subsidies will be sheltered from the effect of the rate increases, higher-income people that do not qualify for subsidies will see their out-of-pocket premiums increase substantially. Blue Cross and Blue Shield of Oklahoma, who has the majority of the individual exchange business in Oklahoma, filed for a 45% rate increase for individual policies. Final rates have not been announced.
For the majority of people who have their coverage through their employers, however, we are seeing a much more stable environment. While premiums continue to rise for McNett Agency clients who have employer-sponsored group health plans, these increases are largely on a par with what we have seen in past years. Fortunately, we are not seeing the kind of increases on group health plans that we are seeing for individual policies.
However, a trend that continues in both the individual and group health insurance markets is increasing deductibles. As spending on health care continues to increase, people are taking on a greater share of these expenses out of their own pockets. According to a study released by the Kaiser Family Foundation yesterday, deductibles are around 50% higher than they were just five years ago. Deductibles on plans offered by small employers are roughly double those featured on large employer plans. Large employers tend to be able to absorb a higher percentage of cost increases than do small businesses.
There had been predictions that employers would drop their plans with the advent of the Affordable Care Act and send their employees to the Exchanges for individual coverage. By enlarge, this has not happened. About 150 million people continue to obtain coverage through their employers, a much larger group than the approximately 11 million buying individual coverage through the Exchanges. It had been estimated that the exchanges would insure some 20 million people by now, with migration from employers dropping coverage. However, perhaps because of the instability shown by these exchanges, employers have been hesitant to drop their group plans and send their employees to the Exchanges.
Most of the largest insurance carriers have either totally dropped out or are severely restricting their participation in the 2017 individual insurance Exchanges in all 50 states. These insurers, including United Healthcare, Aetna, Humana and others, have lost hundreds of millions of dollars on these non-group, individual policies since the Exchanges opened for business in 2014. Some states, including Oklahoma, are down to only one insurance carrier participating in the Exchange for 2017, greatly limiting consumer choice.
The opinion is, in many quarters, that some of the rules that govern these Exchanges must be altered to make them viable. If insurers cannot make at least a small profit on these individual policies, we may find ourselves in a situation where no commercial insurer will participate, causing the entire concept to fail.
Robert K. McNett, LUTCF
The McNett Agency
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