There’s a national debate going on about just how costly health insurance will be once federal health reform rolls out next year. And this week, Connecticut got another clue.
Aetna became the third insurer to submit a proposal for what it will charge customers buying coverage through the state’s new insurance market, created as part of federal health reform and known as the exchange.
If approved by regulators, the average premium for an Aetna plan sold on the exchange’s individual market would cost $364 a month. But costs would vary considerably based on a person’s age, location and plan selected, ranging from $111 to $1,175.
The Hartford-based insurer will not sell any plans through the exchange’s small-group market.
So far, some observers have said they’re encouraged by the rates proposed, although not everyone thinks they’re low enough to get the uninsured to buy coverage. And some have cautioned that it’s too early to draw conclusions, particularly since the Connecticut Insurance Department must still approve the rates.
In addition, the state’s largest insurer, Anthem Blue Cross and Blue Shield, has not yet submitted its rate filings. A spokeswoman said the company will file proposals shortly for plans to be sold through the exchange to both individuals and small groups.
Kevin Counihan, CEO of the state’s exchange, known as Access Health CT, said it’s still early, and noted that the exchange’s actuarial firm is still analyzing the proposed rates.
“I feel, directionally, things are looking positive,” Counihan said. “I feel like we’re seeing the marketplace working. We’re seeing that the competition is helpful to consumers and small businesses.”
He added: “We’re going to obviously learn a whole lot more when we see the Anthem filing.”
And Counihan noted that many people who are currently uninsured — those earning below 400 percent of the povery level — will qualify for federal subsidies to keep their premium costs down. The subsidies are intended to ensure that people can buy insurance without spending more than a certain percentage of their income.
“Premium prices and affordability for the uninsured are actually mutually exclusive for the vast majority of the uninsured,” he said.
Aetna’s rates
Aetna’s proposal contains more details on costs and plan projections than the two other sets of proposals submitted so far, by ConnectiCare Benefits and HealthyCT, a new nonprofit insurer.
HealthyCT’s proposal said its average premium would cost $427 a month on the individual market. Overall, monthly costs would range from $141 to $1,364.
ConnectiCare did not submit an average cost or price range. Its proposed base rate — the starting point, from which costs would be adjusted up or down based on age, location and plan selected — would be $397 in the individual market.
Aetna projected that two-thirds of its exchange customers will buy the lowest-price plan available to most people, which would cost an average of $356 per month.
The health reform law, commonly known as Obamacare, requires that exchange plans be offered in multiple “tiers” that differ based on how much of a person’s medical costs the plan pays. A bronze plan would cover 60 percent of a person’s medical costs, leaving the customer to pay the other 40 percent. Silver plans would pay 70 percent, gold plans would pay 80 percent, and platinum plans would cover 90 percent.
A person who uses a lot of medical services might choose to pay higher premiums for a plan that covers a larger percentage of medical costs, while a person who is relatively healthy might prefer a plan that requires higher out-of-pocket costs when getting medical care because it carries a lower premium.
People under 30 will have another option: A catastrophic plan that provides less coverage for medical care but has a lower premium. Aetna’s catastrophic plan, for example, would cost an average of $177 a month under the proposal, but would have a $6,350 deductible for an individual using in-network services. The company estimated that 11.4 percent of its customers buying through the exchange would choose that plan.
Aetna’s proposal said that the average premium for a silver plan would cost $487 per month, while the average gold plan premium would be $477. The silver plan’s average cost is projected to be higher than the gold plan, even though gold plans cover more medical costs, because the company expects the average age of people buying silver plans will be older than those buying gold. The company projected that 19.3 percent of customers would buy a silver plan, while only 2.1 percent would buy the gold option.
Aetna doesn’t expect to offer a platinum plan.
How do those prices compare to plans offered today?
Susan Millerick, an Aetna spokeswoman, said it’s hard to compare because the plans sold in the exchange will be new products and subject to rules that don’t currently apply. But as an example, she cited the case of a 40-year-old buying an open access Aetna plan. This year, the monthly premium averages $192 for women and $131 for men.
For a 40-year-old to buy Aetna’s bronze plan in the exchange, the proposed cost would be $275 for both men and women.
Some of that is because of rising medical costs that are unrelated to the health reform law. Aetna forecasted that those costs will increase by 11 percent. But its plan pricing also took into account changes required by Obamacare, including a new prohibition against charging people more based on their medical history or gender, and a limit to how much prices can vary based on age.
Plans will also be required to cover a set of “essential” benefits and cover at least 60 percent of a person’s medical costs. Currently, many plans cover far less than that.
In its filing, Aetna said it was predicting a significant level of adverse selection because the penalties for not having coverage, which might entice healthy people to buy insurance, will be relatively small.
Rate shock? Or not so bad?
People can begin enrolling in coverage through the exchange on Oct. 1. The plans will take effect Jan. 1, 2014. Connecticut’s exchange is expected to sell health care coverage to 80,000 to 100,000 currently uninsured people.
As rate proposals come in across the country, the question of what insurance costs remains a major source of dispute.
Earlier this month, Republican Congressional staffers issued a report warning that people could face “massive premium increases” once Obamacare rolls out. It projected that on average, the new requirements of the health reform law would raise premiums in the individual market by 96 percent. Some people could see prices rise by 413 percent, they wrote.
The report cited information submitted by unnamed insurance companies to Rep. Fred Upton, a Michigan Republican who leads the House Committee on Energy and Commerce.
“The minimum coverage requirements will increase premiums for those who had previously purchased less robust coverage, while ‘the infusion of less healthy individuals into the risk pool’ will compound premium increases,” the report said.
In response, the committee’s Democratic staff wrote that the report overlooked the benefits of improved coverage and failed to incorporate cost-saving provisions. They pointed to the experiences of some states where rate proposals have already been filed, and said competition in the exchanges is paying off. In Oregon, they noted, two insurers that had proposed to increase rates indicated that they would apply for lower rates once they saw competitors’ proposals.
In Vermont, state officials have said that the rates for plans sold on the exchange would be “roughly comparable” to what people currently pay, but they would provide better coverage.
Counihan said the experiences of other states suggest that “the predictions that the sky is falling are not turning out to be true.”
“The marketplace is working,” he said. “I think it is showing that when plans compete, it works out to drive broader value and benefits for consumers.”
Counihan said Anthem will be “a big driver for how people look at rates,” and said it’s possible that whatever Anthem submits could cause other companies to refine their proposals. He cautioned against comparing Connecticut’s plan costs to prices in other states because health care costs vary in different markets.
Ellen Andrews, executive director of the Connecticut Health Policy Project, said Aetna’s rates showed that competition is working. But she said the rates proposed for the state are still higher than in California, where the exchange is more selective about which plans it will sell. And she said she’s worried that the prices are still too high for people who can’t afford coverage now.
“While it’s definitely getting better, we need to come down more to get most uninsured people to buy,” she said.