The Kentucky Department of Insurance recently approved insurers’ requests for rate hikes. And all but one of the 13 insurers selling individual and small-group plans in the state are raising rates.
The approved increases, which are averages among the plans each insurer offers in Kentucky, are nearly identical to insurance company requests made to the state’s Department of Insurance in June. Most are between 5 and 15 percent.
The highest increase, by far, comes from the carrier designed to provide the most affordable plans. The Kentucky Health Co-Operative, a nonprofit governed by its members, will see a 25.1 percent rate increase for individual plans this year. Last year, the co-op implemented a 20 percent rate hike.
The co-op was part of a government push to increase competition among insurers. Funded by a federal loan made available through the Affordable Care Act, its massive back-to-back rate increases suggest things aren’t working as planned.
“They got more population than they determined. They had set their rates fairly low, and they had a lot of high-cost claims. So, those three scenarios ends up in losses,” said Kentucky Insurance Commissioner Sharon Clark.
A recent report from the Department of Health and Human Services said the co-op had lost $50.4 million by the end of 2014.
Overall, only one insurance company — WellCare Health Plans of Kentucky — requested a rate decrease.
State insurance regulators approved all but two of the increases requested by insurers. Among the highest is CareSource KY, which will raise rates nearly 12 percent for individual plans it offers both on and off Kynect, the state’s insurance marketplace. Golden Rule Insurance Company was granted the 11.5 percent increase it requested for plans it sells outside Kynect.
Six insurers will also begin selling individual policies in Kentucky, among them Anthem and UnitedHealthCare, two of the biggest insurers in the country.
Regulators slightly reduced the increase requested by Anthem Health Plans of Kentucky, granting a 12.2 percent hike for its individual plans. And the state is permitting Louisville-based Humana to raise rates for its small-group plans by 7.77 percent.
Clark said the fluctuations are in part the result of the Affordable Care Act, which requires insurers to issue policies regardless of a person’s health status or history.
Soon after the law’s inception, insurers had to make educated guesses about potential policyholders and rates. She said rates for 2014 and 2015 were based on only a few months of data, which didn’t give insurers the knowledge needed to set realistic rates.
But the 2016 rates were based on 15 months of data, which gave carriers a better perspective on what usage had been and what they could anticipate going forward.
“The market is kind of evening out to reflect that actual experience, and it usually takes three to four years for a health insurance company to really get a good understanding of who their policyholders are (and) what’s been their claim experience so that the rates can become more stable and finalized,” she said.
Clark said there was a lot of demand for knee and hip replacements, and prescriptions for diabetes and hypertension within the first few months of open enrollment. That new demand also contributed to an increase in premiums.
“It will have a negative impact on consumers, but we also know that in the long run, having the needed health insurance and having the ability to get the services they need could also save them money,” she said.
With rates increasing, the impact of federal subsidies provided under ACA could be diluted depending on the quality of the plan a customer chooses. Those subsidies will still be based on an individual’s income.
“If they elect to chose a gold plan, which is what we call a rich plan with richer benefits, their subsidy will remain the same, but their out-of-pocket will be more,” Clark said.
After insurers made their requests in June, Gov. Steve Beshear — a strong proponent of the federal health care reform law — said customers should pay attention to rate changes for their own plans, not rate increases in the system as a whole.
“When open enrollment begins this fall, Kentuckians should seek information about their individual plans, not average costs,” he said. “System-wide averages don’t give a good picture of what an individual’s out-of-pocket costs may be.”