Insurers, others gearing up for year two – and three – without first-year data
One year has passed since the launch of insurance marketplaces under the Affordable Care Act, but actuaries – and other health care stakeholders – are still in a tough spot, and may stay there for some time.
At a discussion hosted by the Nashville Health Care Council Wednesday, panelists described the enormous amount of actuarial work required to price a brand new health care market like the one created by the ACA. All stakeholders face various uncertainties through the law, but insurers are particularly challenged as they try to set rates with effectively no data. Many who enrolled through the federal marketplace were previously uninsured, said Jim Srite, chief actuary for BlueCross BlueShield of Tennessee, meaning insurers had to make their best guesses about how much those patients might cost.
In Tennessee, BlueCross shot too low and took on more sicker enrollees than it had expected but fewer healthier, younger people to balance out the risk pool. The insurer said in July it could lose “tens of millions of dollars” on the faulty prediction. BlueCross requested and was approved for a 19 percent premium increase to help cover those costs, but that too was an actuarial estimate. Next year won’t be much better – Srite said he will have to set the rates for the 2016 market next summer – before he has received a full set of 2014 data.
“This is going to be a two-, three-year process to normalize this and figure it out,” Srite said.
Whether the political class will give the market enough time to make those adjustments remains to be seen, particularly after last week, when Republicans took control of the Senate in mid-term elections and the Supreme Court agreed to hear King vs. Burwell, a circuit court case about whether insurance subsidies can be provided to plans purchased on the federal exchange.
“[The Supreme Court case] leads to a lot of uncertainty,” said Charles Kahn, president and CEO of the Federation of American Hospitals. “You could see it going either way. In a way, it’s sort of Bush versus Gore, politically. Health reform – well, Obamacare, anyway – is the great political divider between Republicans and Democrats. We’ll have to wait and see.”
Kahn said he expected health reform to survive through the next two years of the Republican-controlled Senate, as President Obama has said he will veto any direct repeal efforts. However, Kahn said the President may agree to sign legislation that repeals pieces of the law – the individual mandate and the medical device tax have both been suggested as easy targets for repeal.