Every year, we inform our individual customers about their premium rates for the coming year with a letter. As our company’s managing actuary, I want to take a moment to explain what went into determining 2015 premiums so you have a better understanding when you receive that letter.
Now, before I dive into this post, I want to cover the difference between individual and group customers – two terms that are used a lot around BCBSNC but aren’t as common in everyday conversations about health insurance.
- Individual customers are those under age 65 who buy their own health insurance from an agent, directly from an insurance company or from HealthCare.Gov. People might buy their own health insurance because they work for a company that doesn’t offer health insurance or because they are self-employed.
- Group customers, on the other hand, are enrolled in a health insurance plan that is offered by the place they work.
A lot of number-crunching is involved in determining health insurance premiums and the implementation of the Affordable Care Act (ACA) has made it even more complicated. With multiple plans, changing regulations and ever-rising health care costs to consider, determining rates isn’t a simple process.
One reason that determining rates is more complicated this year is because the ACA created three categories for our individual customers who are under age 65. Each category was priced separately based on unique considerations and what we know about its customers. Here is a quick definition of each category:
- ACA plans are the new plans offered on and off the Health Insurance Marketplace. These plans are required to cover 10 categories of essential health benefits.
- Grandfathered plans are plans that went into effect prior to March 23, 2010. If you bought an individual plan with us prior to then and still have that same plan, you are “grandfathered.”
- Transitional plans (sometimes called grandmothered plans) are non-grandfathered plans that the administration announced could be extended last November. If you were informed late last year that you could keep your plan even though it was not ACA-compliant or grandfathered, then you are on a transitional plan.
Here’s an overview of how individual rates will change for these plans in 2015. Please note that everyone will be impacted differently depending on each customer’s unique situation–age, plan, tobacco use and where customers live may be reasons a customer’s percentage rate increase is different from what I’ve outlined below:
ACA plans will see an average increase of 13.5 percent in 2015. Why?
Back in May, we talked about our new ACA customers after the first Annual Enrollment Period. We enrolled more than 232,000 customers in ACA plans on the Health Insurance Marketplace, and our new customers are older and less healthy than we anticipated. That means we have a large pool of older, less healthy customers, and rates will increase partly to help cover the high health care usage of these customers.
Grandfathered plans will see an average increase of 13.4 percent.
The grandfathered pool is closed to new customers, meaning new, younger customers can’t enroll to help offset the rising medical costs of existing customers. When we set prices for this group, we expected that many of the older and less healthy customers with these plans would move to ACA plans. Some did, but not as many as we expected. The result: Our customers with grandfathered plans are now older and less healthy than we anticipated. As existing grandfathered customers age, they face higher medical costs and use more health care services, all of which contributed to these rate increases.
The transitional plans will see an average increase of 19.2 percent.
Transitional plans will see rate increases for a few reasons. As with grandfathered plans, the customer pool for transitional plans is also closed. Other contributing factors, including treatments for heart disease, cancer care and procedures for bone and joint issues, have also resulted in higher medical costs for this group. Further, we’ve seen many of the healthier customers leave this group at a rate higher than we expected.
The chart below shows how the percentages I just covered translate to premium prices.
Helping you make the best decisions about your health insurance
We’re committed to helping consumers have the best possible experience when buying health insurance on the Health Insurance Marketplace. Some of the issues related to the Health Insurance Marketplace are out of our hands, and a technical problem in one area can have a domino effect on other areas of the enrollment process. But no matter what, we’ll be here for consumers to provide information and assistance in any way we can.
Here at BCBSNC we have a variety of tools and resources to help you choose the right plan to meet your health and wellness needs. Check out some of the links throughout this post for more information, visit your neighborhood agent or use our online tools to guide you through the enrollment process. And don’t forget to enroll by Dec. 15 if you need coverage by Jan. 1, 2015!