Insurance companies have proposed a net reduction in premiums of 2 percent next year for the Arkansas Health Insurance Marketplace, the health insurance exchange created by the Affordable Care Act. The Marketplace includes all of the plans used for the private option, the state’s unique plan which uses Medicaid funds to purchase private health insurance for low-income Arkansans.
As we reported last Friday, information about the proposed rates was accidentally leaked last Friday after the information was posted online by the Arkansas Insurance Department‘s Rate Review division in error. Today, the governor’s office issued a press release stating that “the Arkansas Insurance Department is projecting that insurance policies sold through the Arkansas Health Insurance Marketplace will see a net decrease of two percent in premium costs for 2015.”
Health insurance premiums for consumers buying coverage on their own was growing 10 percent or more per year before Obamacare. It’s become almost axiomatic in health care that insurance premiums will go up every year, so a potential decline is huge news.
According to the governor’s release: “This calculation includes the policies offered through the Arkansas Private Option, which will notice a small decrease in premiums, but will essentially remain flat in comparison to 2014. This is an aggregate projection, meaning that some individual consumers will see a small increase in premiums, and others will see their costs drop more than two percent. Nationwide, insurance costs historically rise by six-to-ten percent annually.” The two percent decline represents a weighted average, meaning it’s based on the number of people projected to be covered by each insurance carrier.
Private option beneficiaries make up more than three quarters of the total number of consumers on the Marketplace and the private option is likely contributing to a healthier pool of people and lower premiums (see here for more details). Lower-than-expected premiums also represent extremely good news for the sustainability of the policy: the lower the premiums, the lower the costs for the private option next year. This also potentially even represents a signal that private option costs this year will be revised downward (see here for more details).
It’s worth noting that lower premiums don’t just reduce the cost of private option beneficiaries. Any Arkansans shopping for individual health insurance on the Marketplace stand to benefit. Lower premiums for non-private option customers also save the federal government money via lowering the cost of Obamacare subsidies for moderate-income people purchasing insurance.
Note that none of the rates are finalized — all plans still need to be approved by the feds. The governor’s release also made no mention of non-Obamacare plans, which were also included in the leaked information. Blue Cross proposed premium increases for some of their plans which are non-compliant with the health care law, based on that information.
I previously calculated a weighted average rate decrease of 3.5 percent for the Obamacare plans based on the accidentally leaked information. As I noted at the time, that information did not appear to include the federal multi-state Blue Cross Blue Shield, so it’s possible that accounts for the slight difference (*nope: see update). The governor’s release said that the “incomplete information that was inadvertently posted…while not drastically different from actual projections…was still not an accurate representation of the actuarial data.” The governor’s press release includes no information about specific rates or specific changes by carrier. ***UPDATE: AID just provided a breakdown by carrier. The listing for Arkansas Blue Cross and Blue Shield includes BOTH the Arkansas Blues and the national multi-state Blues. The number of covered lives are based on the time of submission, which was in June. In terms of the premium changes approved by AID, the previously leaked information was correct for Qualchoice (5 percent increase) and Celtic (selling in Arkansas as Ambetter, 12 percent decrease) but incorrect for Blue Cross — the leaked info suggested that Blue Cross had proposed no change; in fact AID approved an increase of 2 percent (after the Blues asked for an 8.5 percent increase). On net, based on 2014 market share, the changes represent a 2.2 percent decrease.
Sen. David Sanders (R-Little Rock), one of the key Republican backers of the private option, said:
This is good news. These are early indications of what our costs will be in 2015 for the private option and these are lower than what we anticipated, both in our planning and what was approved in the waiver. We are seeing that not only lower-income Arkansans can participate in health insurance markets, but, if done correctly, they can actually have a positive impact on health insurance markets.
Rep. David Meeks (R-Conway), who opposed the private option, expressed caution about the numbers released today. “Those plans are still under review and haven’t been approved yet by the feds, so I would wait and see what the final numbers would be,” he said. Meeks also noted that some people with non-compliant Blue Cross plans may see rates go up this year; these people are allowed to keep their non-compliant plans through the fall of 2017, and Meeks worried about the impact on the insurance pool if those folks eventually transition to the Marketplace (the assumption has actually generally been that the people keeping non-compliant plans leaned healthy, but we’ll see).
Meeks acknowledged that if the premium decreases currently projected end up being finalized, it represents good news. “Of course it’s good news, because of the fact that at least for a year, anyways, it’s going to overall save the taxpayers money while this program is in place,” Meeks said. “But even so, there are still going to have to be changes that are going to be made regardless even though we’ve seen the price is lower—because we’re still potentially talking about between a billion and a billion and a half dollars of taxpayers’ money.”
As to the future of the private option, Meeks said, “I think you’ll either see it be repealed and replaced, or you’ll see some major changes to it.”
Press release from the governor’s office after the jump:
Health Insurance Marketplace Premiums Projected to Drop Two Percent in Arkansas for 2015
LITTLE ROCK – The Arkansas Insurance Department is projecting that insurance policies sold through the Arkansas Health Insurance Marketplace will see a net decrease of two percent in premium costs for 2015. This calculation includes the policies offered through the Arkansas Private Option, which will notice a small decrease in premiums, but will essentially remain flat in comparison to 2014. This is an aggregate projection, meaning that some individual consumers will see a small increase in premiums, and others will see their costs drop more than two percent. Nationwide, insurance costs historically rise by six-to-ten percent annually.
This information is being released in light of incomplete information that was inadvertently posted on an Insurance Department Web site. While not drastically different from actual projections, the posting was still not an accurate representation of the actuarial data.
Final rates will be released once the plans are certified by the U.S. Department of Health and Human Services. This will happen before open enrollment for 2015 begins on November 15.