Gary Passama

Gary Passama retired as president and CEO of NorthBay Healthcare on March 31, 2017. An active blogger since 2010, here’s a collection of his work.

Springtime For Health Plans

April 28, 2016
 

It is springtime. It is when health plans turn their attention to unveiling proposed rates for the next calendar year to state or federal exchanges, the entities that oversee the implementation of the Affordable Care Act (aka “Obamacare”) in states where they operate.

But 2017 will be a different year, especially for the plans approved by the exchanges to be sold to individuals who are mandated to have health insurance coverage.  From 2014 to 2016 there was a degree of protection built into the Affordable Care Act, which shielded health plans from “adverse selection.”

What’s that? It is a fancy term that describes when one plan enrolls more sick patients than other plans. You see, the more healthy people in your health plan, the less the plan pays physicians and hospitals out of the premiums they collect. If you’ve adversely selected your policy holders, you will not make as much money. So the government made some economic adjustments that gave the plans suffering from adverse selection some shelter. But that protection disappears in 2017.

Already, UnitedHealthcare, the nation’s largest provider of health insurance, announced it will no longer participate in the Obamacare exchanges in 2017. That means 800,000 UnitedHealthcare members who purchased mandated individual coverage through various exchanges must change insurers.

UnitedHealthcare claims it lost buckets of money in 2014-15. It says it expects to lose more in 2016, even with the protection the Affordable Care Act was supposed to provide to plans with adverse selection. Unlike the federal government, the company says it cannot run at a deficit indefinitely. 

It will be interesting to see what happens here in California.  Pundits elsewhere predict that when the protection for adverse selection is gone, health plans will factor that in their premiums. That may mean larger increases in premium proposals than what was proposed in the past three years. That would be interesting given it is an election year.

Covered California, the Obamacare California state exchange, has been able to keep premium increases lower than in other states – so far. California, unlike many states, has more health plans competing for individuals. That has helped keep rates lower.  I am not sure how much longer that will last.

With these changes in the offing, proponents of the Affordable Care Act may well look back upon the period 2014-2016 as the golden era. Obamacare opponents may soon be saying I told you so.

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