Last September, when we wrote about the fact that the average individual rates increase in Colorado was less than one percent for 2015, we noted that the overall rate increase was astoundingly low – far lower than anything we’d seen during our time in this industry.
And although it will be several more weeks before the 2016 rate review process is finalized in Colorado, it’s very unlikely that last year’s historically-low rate increases will be repeated for 2016. Regulators are currently analyzing rates, and while it’s a meticulous process, rates that are adequately justified could be approved by the state, even if they’re relatively high. It’s a myth that regulators can simply reject higher-than-average rate increase proposals; in Oregon, regulators actually required some carriers to increase rates beyond what was proposed for 2016, because ultimately, the actuaries who are analyzing rates are responsible for making sure that carriers’ rate increases are justified, but also that they remain solvent.
With that said, it’s important to remember that the rate proposals we have so far are just that: proposals. A lot could change between now and September. But looking at the current proposals, it’s reasonable to expect that we might see some shifting market share – once again – during the upcoming open enrollment period (November 1 to January 31).
For 2015, Colorado HealthOP cut premiums aggressively, and ended up with the lowest-cost plans in eight of the state’s nine rating areas. Unsurprisingly, that resulted in the CO-OP garnering the highest market share in the exchange during the 2015 open enrollment period, with nearly 40% of exchange enrollees selecting Colorado HealthOP coverage (among our own clients, Colorado HealthOP was even more popular, including among those who selected off-exchange coverage).
The take-away? Premium is still king. Obviously there’s a lot involved with selecting a health insurance plan, including cost-sharing requirements and network size. But a carrier that positions itself as the lowest-priced option is probably going to end up with significant market share. Really, that has always been true, even before the ACA dramatically increased the standardization of coverage. Premium is one of the main ways that plans can differentiate from one another now that all plans cover essential health benefits, cannot use medical history to underwrite applications, must follow the medical loss ratio guidelines, and are limited by the ACA’s cap on out-of-pocket costs (for 2016, out-of-pocket will be capped at no more than $6,850 for an individual, and $13,700 for a family – see page 10825 of the final regulation for more details).
In 2015, Colorado HealthOP got almost 40% of the exchange’s market share, and Kaiser was a close second with 35%; the two non-profits accounted for three-quarters of all the private plan enrollees in Connect for Health Colorado this year.
So what should we expect for 2016?
Carriers in the individual market in Colorado have proposed rate changes that range from a 5.1% decrease (Cigna) to a 34% increase (Rocky Mountain HMO). For the two carriers that insure the bulk of the exchange’s enrollees, Colorado HealthOP has proposed an average rate increase of 21.6%, and Kaiser has proposed an average rate increase of 2%. Assuming the claims data justifies those rate changes, I think it’s safe to say that we’ll probably see another shake-up of the health insurance market share here in Colorado next year.
There will also be a flood of enrollees signing up for ACA-compliant coverage for the first time during the 2016 open enrollment period, since Colorado is ending grandmothered (transitional) plans at the end of this year. About 75,000 people who have kept pre-2014 individual plans until now will have to enroll in ACA-compliant plans instead, significantly increasing the size of the pie for carriers vying for new business in Colorado’s individual market.
We’ll post another update once Colorado’s regulators have finished their review of rate filings for 2016. But it’s reasonable to assume that Colorado HealthOP’s ultra low 2015 rates will no longer be available in 2016. It’s also important to remember that this sort of shifting has always existed in robust insurance markets like we have here in Colorado. Over the years, we’ve seen various carriers position themselves as the lowest-cost option for a year or two, and their market share grows during that time. But then another carrier would introduce lower-priced plans, and become the go-to option for price-conscious consumers. The ACA makes it easy to compare apples to apples when shopping for insurance, but market-driven pricing competition will continue to result in fluctuating market share and premiums.
What does this mean for enrollees?
Don’t forget to shop around during open enrollment! Subsidies are tied to the second-lowest-cost silver plan in your area, so if a new plan takes over that spot or if the premium changes significantly, subsidies for everyone in the area will change (subsidies were lower in most places in Colorado in 2015 versus 2014, because the second lowest-cost plan was less expensive the second year). Don’t assume that your current plan will continue to provide the best value in 2016. Pay attention to the rate change notice you get from your insurer, and contact us if you want help comparing the other options available for 2016. As always, there’s no charge to have a broker help you enroll.
And one more thing… for two years in a row, Colorado has had a far higher percentage of enrollees selecting bronze plans compared with other states (scroll to the graphics at the bottom of that link). If your household income doesn’t exceed 250% of the poverty level, keep in mind that the ACA also offers cost-sharing subsidies to reduce the amount you pay in deductibles, copays, and coinsurance – but only if you select a silver plan. Bronze plans are the least expensive option, but they’re not usually the best option for lower-income enrollees, since they tend to come with significant deductibles. So if you’re on a plan with a high deductible and finding that you can’t afford to use it, be sure to shop around during open enrollment. And if your income doesn’t exceed 250% of the poverty level, pay particular attention to the silver plans.