A glimpse at Obamacare insurance rates and assumptions behind them

You’ll still have to wait a bit to find out exactly what it will cost to buy a health plan through the state’s new insurance marketplace, known as Access Health CT.

But on Tuesday, actuaries consulting for the marketplace’s board gave their take on the proposed premiums, offering a glimpse at the assumptions behind the pricing, the range of potential costs, and the complexity of setting and approving insurance rates for markets subject to major changes brought by the federal health reform law.

“This is a snapshot,” Julia Lambert, president and senior consulting actuary for Wakely Consulting Group, told the Access Health board. She called the report “a little bit premature,” because the proposed rates haven’t been approved by the Connecticut Insurance Department, and so aren’t yet final. The insurance department is expected to issue decisions in the coming weeks.

Among the findings Lambert cited: In many cases, customers will likely find little variation in the price for comparable plans offered by different insurers. That’s despite widely varying assumptions different carriers used in creating their rates, particularly about the health of the people buying insurance next year. In general, it will cost less to buy insurance through the new individual market than the one for small businesses.

And all but one carrier have revised their rate proposals since initially filing them, often lowering the rates after interactions with the insurance department.

“During the rate review process, there have been fairly significant reductions in rates as a result of the review process,” Lambert said.

A changing market

Five insurers have submitted proposals to sell health plans through Access Health, the state’s new health insurance exchange, which was created as part of the federal health reform law. Four will sell plans to people who buy coverage on their own, and three will offer plans for small businesses. The coverage will take effect Jan. 1. Many customers will qualify for discounted rates, subsidized by the federal government, based on their income.

The federal health reform law, known commonly as Obamacare, makes several key changes to insurance market rules, and the carriers vary widely in their estimations of how those changes would affect the insurance pool.

“The current individual market is very different than what the market will be in 2014,” Lambert said.

That’s because in Connecticut today, people can be denied coverage if they’re not considered healthy enough. Beginning in 2014, Obamacare will require insurers to sell coverage to anyone who wants to buy it, potentially making the overall insurance pool less healthy, with higher health care costs.

But just how much less healthy will it be? Lambert said that’s probably the hardest change for actuaries to estimate.

A sicker population?

For individual-market plans, Aetna assumed that the newly insured population would be 44.7 percent costlier than those it currently covers. Anthem Blue Cross and Blue Shield assumed it would only change by 4.52 percent — barely 10 percent of the change Aetna forecast. ConnectiCare Benefits fell in the middle, factoring in a 19.8 percent increase.

The fourth carrier in the individual exchange market, HealthyCT, is new to Connecticut and didn’t provide information on that assumption.

One explanation for the difference, Lambert said, could be that Anthem’s existing pool is already less healthy than Aetna’s. Still, she noted, the overall rates the carriers proposed didn’t vary so widely.

“It’s important to realize that at the end of the day, that the rates were fairly narrow between the lowest and the highest,” she said. “Maybe they all kind of got to the same place, but the way that each carrier got there was different.”

Aetna also built in an additional 4.4 percent to its proposed rates for “pent-up demand,” accounting for the possibility that people gaining coverage after being uninsured will initially get lots of medical care to make up for years of going without. Anthem and ConnectiCare did not include that in their calculations.

Requiring insurers to cover everyone isn’t the only big change for the insurance pool. The health reform law also requires nearly all Americans to have insurance, something intended to get healthy people into the insurance pool too. Another major unknown is how many of them will buy coverage, balancing out the sicker customers, and how many will choose to instead pay the penalty for not getting insurance.

What goes into your rates

How much a particular person would have to pay to buy coverage through the exchange will vary based on his or her age, location and the particular health plan selected, as well as whether he or she qualifies for a federally subsidized discount on the price.

Based on the proposed rates, people in Fairfield County would pay the most for any given plan, although Aetna customers in New London County would also have some of the highest rates.

People will have a choice of coverage levels from each carrier. The differences are signified by metals, and based on the percentage of medical costs the plan will cover. In a bronze plan, for example, the plan would pay 60 percent of medical costs, while the customer would be left to cover the remaining 40 percent. A silver plan would cover 70 percent of medical costs, while a gold plan would cover 80 percent.

The customer’s share of costs could come in the form of deductibles, copayments or co-insurance, depending on the plan.

People under 30 will also have the option of buying a catastrophic plan that provides less coverage and costs less. Insurers were allowed to offer a platinum plan that would cover 90 percent of a customer’s medical costs, but none are doing so.

Small range of prices

The range of rates between carriers for the lowest-cost plan offered in each metal tier is likely to be relatively narrow, Lambert said. Her firm’s analysis was based on rate proposals, so the exact numbers are subject to change when the insurance department finalizes the rates.

For a single 21-year-old in Fairfield County, for example the Wakely analysis found that the monthly cost of a plan on the individual exchange varied less than $25 between the four carriers, from $222 to $246. For gold plans, the costs would be higher, but the range was still small, from $353 to $374. The range was somewhat larger for silver plans, from $289 to $344.

For a single 35-year-old in Fairfield County, the lowest-cost bronze plan choices from each insurer would range from $272 to $300. The silver plan options would range from $353 to $418, and the gold options would range from $431 to $457.

A couple aged 50 and 55 in Fairfield County would have options ranging from $893 to $986 for a bronze plan, $1,160 to $1,380 for silver, and $1,071 to $1,421 for gold.

All those rates could be lower if the customers qualify for federal subsidies to reduce their costs. Those discounts are available to anyone earning below 400 percent of the poverty level.

Lambert said the small range in prices is not unexpected. “All of the rate filings were public,” she said. “[The carriers] were allowed to refile.”

Access Health CEO Kevin Counihan said that suggests that competition in the new marketplace was working to the benefit of consumers.

“I think we’re going to have decent rates,” he said.

Lower rates for individual market

Overall, the rates proposed for the individual exchange market are lower than those proposed for the small group exchange, Lambert said.

For that Fairfield County 21-year-old, for example, the Wakely analysis found that, buying as part of a small group, the lowest-cost bronze plan each carrier offers would vary from $301 to $328. The cost of a silver plan would range from $375 to $406, while the cost of a gold plan would range from $429 to $484.

For the 35-year-old, meanwhile, the carriers’ lowest-cost bronze plans would range from $368 to $401, while the silver plan costs would range from $459 to $496, and the gold plan costs would range from $525 to $592.

The couple aged 50 and 55 would have options ranging from $1,208 to $1,317 for a bronze plan, $1,508 to $1,629 for a silver plan, and $1,725 to $1,945 for a gold plan.

Lambert said the difference between markets is likely in part because of a federal reinsurance program designed to limit carriers’ losses in the individual market for the first three years of the exchanges. There’s no similar program for the small-group exchange. But she said the extent of the difference between the two markets was too large to be fully explained by the reinsurance program.

“We believe that the carriers believe that the risk pool for individuals is slightly better than the risk pool for small group,” she said.

That fascinated board member Grant Ritter, a health care economist. He noted that typically, the population covered by small businesses is healthier than those who buy insurance on their own, since those covered by businesses are healthy enough to work.

Lambert said her explanation for the pricing differences was speculative, and said some of the difference could also be insurers taking greater risks in the individual market, emboldened by protections in that market against high losses and eager to get a share of the thousands of new potential customers.

There could be “some land-grab mentality going on here,” she said.