Early Look at 2015 HIE Rates: Avg. Increase = 10%


11 states have disclosed insurers’ proposed rates for plans to be sold on the health insurance exchanges (HIEs) in 2015. The enrollment-weighted average rate increase thus far is 10.0%. These states’ 2014 HIE beneficiaries represent 14.6% of nationwide 2014 HIE enrollment

Although it’s too early in the process to know how 2015 actual rates will shape up nationally, it’s notable that proposed rate inflation outstrips the underlying medical cost trend (+/- 5.4%) in all 11 states except Maine, which suggests insurers are facing greater-than-expected claims costs

If realized rate increases are on par with early figures, growth in net premium costs will easily outpace income growth for subsidy-eligible households, owing to the Affordable Care Act’s (ACA) subsidy indexing provisions. This imbalance would further diminish the value of HIE coverage for younger / healthier enrollees – who are already under-represented on the HIEs – resulting in mounting adverse selection pressures

In this case, HIE-related gains in per-capita demand intensity and hospitals collections are likely to disappoint; and HIE rules and regulation ultimately must be modified by (re-)allowing greater premium differences based on age, (re-)allowing higher out-of-pocket maximums, reducing the scope of mandatory benefits, increasing subsidies, increasing penalties, and/or forcing the merger of adverse HIE risk pools into larger, better balanced risk pools

For our full research notes, please visit our published research site

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