Texas News

ARTICLE

Date ArticleType
7/20/2016 TAB

TAB's Daily Message for Wednesday, July 20

If there was ever a question of why we need to fix Obamacare, this should answer it. 

Bill Hammond
CEO

http://www.expressnews.com/business/health-care/article/Obamacare-ripples-through-Texas-as-health-8381362.php?t=da8c181846&cmpid=email-premium

Obamacare hitting Texas hard as insurers propose steep rate increases
Consumers facing higher premiums, fewer options

By Peggy O’Hare, Staff Writer

Hanna Nowak and her 1-year-old son, Bill, enjoy a moment at their home in Floresville. Hanna and her husband, Damian Nowak, currently pay almost $700 a month for a Blue Cross Blue Shield of Texas health insurance plan. .

Now the insurer is proposing to raise rates for health plans like Nowak’s by nearly 60 percent effective Jan. 1, a change that could increase his monthly health insurance costs to $1,069 and affect more than 602,000 customers statewide, according to filings it has submitted to federal regulators.

Those requested increases — the steepest of any in Texas, according to HealthCare.gov’s Rate Review page — would apply only to Blue Cross individual plans that consumers purchase themselves and not to group plans obtained by companies for their workers.

Nowak doesn’t blame Blue Cross. He blames the Affordable Care Act, President Barack Obama’s signature health care law, which took full effect in 2014 and required all Americans to get coverage.

“Before Obamacare was imposed, everyone was free to choose whatever worked for them or not choose anything at all. And providers were free to choose whatever they think is best for their customer,” said Nowak, 28, CEO and co-owner of Virtkick Inc., a company that builds software for cloud-hosting providers.


Insurers are also taking on significantly riskier customers since the Affordable Care Act opened the door for all Americans to buy health coverage. Under the health care law, insurers can no longer deny coverage to consumers who have pre-existing health conditions.

That’s allowed the people who need and use the coverage the most to get insurance, while the younger, healthier people who were supposed to balance that out are opting to self-insure or go without coverage. It’s leading to higher health insurance premiums and fewer plan choices for consumers throughout Texas.

“In general, what we’ve seen is that the oldest, sickest people who could not get insurance otherwise are signing up like crazy,” said Dana Forgione, an accounting professor who chairs the University of Texas at San Antonio’s business of health program. “But the young healthies, it’s still a hard sell.”

Blue Cross officials caution that the actual prices levied in 2017 may end up being quite different because no final decisions have been made. Federal and state regulators are still reviewing health insurers’ proposed rates for Texas consumers next year.

Regardless of what happens, Nowak said he will do what he always does — shop around for the most affordable option.

“I might change from Blue Cross to something else,” he said. “However, it’s all based on the fact that Obamacare is broken.”

Blue Cross lost $770 million on individual plans sold in Texas last year, the company told federal regulators in filings justifying its requested rate increases in May. It attributed the loss mostly to actual claims for medical care being “significantly higher than expected” on its Affordable Care Act policies purchased by individuals and families.

The company is seeking rate hikes ranging from 57.3 percent to 59.4 percent for its Blue Advantage individual plans to be sold next year. All of those plans were offered in Bexar County during this year’s open enrollment period, which ended Jan. 31.

And Blue Cross is not alone. Plenty of other insurance carriers in the Texas market — including Humana, Aetna, Oscar Insurance Company of Texas and Allegian Insurance Co. — have notified regulators of potential rate increases for certain products in 2017.

Not everyone covered by these plans will feel the sting if the requested rate hikes take effect, Forgione said.

“For the consumer who is getting subsidies, they’re going to feel relatively little impact from this,” Forgione said. “Plus, these rates all have to go through the regulatory review process. And the final result may be nowhere near what (insurers are) asking for upfront. So some of this is negotiating posturing — you know, asking for a lot more and settling for less.”

Consumers such as Nowak who aren’t receiving tax credits or other subsidies to ease their payments will feel it the most. “And they’re going to start looking for alternatives,” Forgione said.

The actual rates consumers end up paying next year also will vary widely depending on their ages, the geographic regions where they live, whether they use tobacco and the level of benefits they choose.

Proposed changes gleaned from preliminary rate filings don’t capture what HealthCare.gov customers will actually pay, the U.S. Department of Health and Human Services said in a recent statement.

Last year, the average monthly premium paid by Texans who received tax credits for coverage purchased through HealthCare.gov dropped $2 — from $89 to $87 per month, department spokesman Jonathan Gold said.

Roughly 84 percent of Texans shopping through HealthCare.gov receive subsidies that reduce their out-of-pocket costs, Gold said. The average tax credit granted to a Texas consumer buying coverage through the federal website this year was $257 per month.

Texans “know that they can shop around and find coverage that fits their needs and budget. In fact, last year more than 48 percent of them did exactly that by switching plans to save money,” he said in a statement.

In some rural Texas counties, Blue Cross has been the only option for consumers looking to buy their own coverage. The company is the only health insurer to offer individual policies in all of the state’s 254 counties.

Blue Cross covered more than 880,000 Texas customers with its individual policies last year. That doesn’t include consumers covered by employer-sponsored group plans or Medicare-related plans.

The rate hikes sought by Blue Cross Texas’ operations aren’t intended to recover last year’s $770 million loss but to offset another loss it expects to incur in 2017 from customers’ anticipated medical costs, said Dr. Esteban López, the company’s chief medical officer. The company wouldn’t say how much it expects to lose on its individual plans next year.

Blue Cross is not publicly traded and doesn’t operate as a for-profit. It saves up reserves to pay for customers’ future medical needs.

“Our individual market business has to stand on its own,” López said in an interview. “We can’t fund this product with other product lines. Every line has to be independent.”

Last year, actual health care costs on policies purchased by individuals exceeded the premiums that Blue Cross’ Texas operations collected from customers. For every dollar the Texas company collected from those customers, it paid out $1.26 in costs, López said.

The average monthly premium paid by a customer for a “silver” health plan — one that typically covers 70 percent of health care costs — was $303.45, while the average monthly cost paid out by the company was $382.34, he said.

Adding to Blue Cross’ challenges — its parent company, Health Care Service Corp., recently saw its credit rating cut by S&P Global Ratings analysts, who projected a third year of marginal to weak profitability.

Humana, meanwhile, is seeking a 45 percent rate hike for its HumanaOne HMO Premier individual plan, federal filings show. That policy was not sold in Bexar County, but was offered in nine counties in Southeast Texas this year. The requested hike is expected to affect nearly 1,700 customers, the company disclosed in a rate increase justification.

Similar to Blue Cross, Humana’s proposed rate hike is being driven largely by expected claims costs, the rising costs of medical care, customers’ increasing use of such services and changes in contracts with hospitals, physicians and other providers, Humana said in a statement.

Because many Humana customers who shop through the HealthCare.gov website receive federal subsidies to help pay their premiums, the actual increases they face come Jan. 1 will vary widely, the company’s statement said.

Humana covered 1.7 million customers in Texas as of March 31, but declined to specify how many of those had purchased their own individual health policies without the help of employers.

The company would not discuss the health plans it intends to offer in Texas next year since regulatory agencies are still reviewing them, spokesman Ross McLerran said.

Rate increases across the country are being driven partly by some carriers’ decisions to withdraw from the government-run exchanges in certain markets, Forgione said. That reduces competition and drives up prices until the remaining players find a way to make the market profitable, he said.

UnitedHealthcare, which sold products on public exchanges in 34 states this year, will no longer sell individual policies on or outside of HealthCare.gov in Texas in 2017.

In a quarterly report released in May, parent company UnitedHealth Group said it will participate in a “substantially smaller number of individual public exchanges” next year.

“We have seen lower consumer participation than we and others expected, lower government expectations for future consumer participation ... and worsening of our own claims experience,” UnitedHealth Group said a separate report in February.

Federal health officials said a new insurer, Magnum Health, will enter the Texas market next year to offer health plans to consumers, but those policies will be sold only in 14 counties in the Dallas-Fort Worth area and won’t be available in San Antonio. Magnum Health is jointly owned by Aetna and Texas Health Resources, a large hospital system in North Texas.

“On balance, we’re seeing a decline in the number of carriers available across the markets,” Forgione said.

Other carriers besides Blue Cross also are looking to raise rates in 2017 for some plans sold in Texas.

Oscar, which just entered the Texas market this year, is seeking rate hikes spanning from 12 to 22 percent for policies it sells in San Antonio and the Dallas-Fort Worth area. The company, which has around 45,000 customers in Texas, generally doesn’t discuss proposed rate increases, spokesman Dave Beauboeuf said.

Allegian, a regional health insurance carrier, requested a 27.5 percent rate increase for its Allegian Choice HMO individual plans, which were sold this year in Bexar County, the Rio Grande Valley and El Paso County. The company did not respond to questions about the proposed hike.

Aetna is seeking a 15 percent rate hike for one of its individual policies, a move that could affect more than 84,000 of its Texas customers, the company told regulators in a filing justifying the request. The proposed rates are the result of changes in the regulatory environment and higher costs for medical services and specialty drugs, spokeswoman Anjie Coplin said.

All of these moves are likely to raise the ire of consumers still fuming over the loss of PPOs, preferred provider organization health plans, which insurers severely curtailed or eliminated completely from Texas’ individual market this year.

PPOs have historically been the most popular type of health insurance in Texas because they provide some out-of-network benefits and don’t require referrals to see specialists. Generally, the only way to get a PPO in Texas today is to enroll in a group health plan offered by an employer.

The rate changes proposed for group health plans sold to small employers — those with 50 or fewer workers — are generally less severe than the rate hikes sought in the individual market, HealthCare.gov shows. And large employers providing health insurance to their workers likely won’t see much impact on their rates unless they had a bad year of expensive claims.

“The individual market is a market of last resort ... And that’s not how it used to be,” said Janna Hamstra, a benefits consultant in San Antonio whose firm, Hamstra Benefit Solutions, advises employers across Texas.

“In our industry, they call it the death spiral ... As those premiums keep escalating, healthier individuals decide to self insure,” she said. “They drop out of that pool because it’s too expensive. And as that keeps happening, then the insurance companies have to increase the rates further.”

Guaranteeing insurance for everyone sounds like a great idea in theory, Hamstra said. “But the flip side of that is to make that available and it be profitable,” she said. “I’m not sure that those two things can co-exist.”