Mergers, Claims Experience To Factor Into 2016 Health Premiums

Let the premium games begin!

With little more than three months before the doors open for the health care open enrollment on Nov. 1, and even less time before many employer-sponsored plans start their enrollment periods Oct. 1, talk of premium increases has begun creeping into the headlines.

Insurers are requesting rate increases of 20 percent to 40 percent, according to a story in The New York Times earlier this month, but the requests have yet to be approved by state insurance regulators. Many other health care policy consultants expect that by the time 2016 rates are set, actual increases will be in the single digits, as many people sign up for silver and bronze plans.

Some increases will be in order of 2 percent or 3 percent, depending on the market. A study of 11 cities by the Kaiser Family Foundation found that health premiums in those markets would rise by an average of 4.4 percent in 2016 for the second-lowest priced silver plan.

Caroline Pearson, vice president for health reform at the consulting firm Avalere Health told NPR in June that premium increases would rise by an average of about 6 percent in 2016.

Analysts say rates this year will be the first generated by actual claims experience under health care reform. Meanwhile, conservative lawmakers and think tanks point to the rate hikes as examples of why the Affordable Care Act should be repealed.

On the other side of the equation, though, is a free market at work: letting health insurance companies compete for group and individual health insurance consumers now that all or almost all Americans are required to carry health coverage.

The nation’s largest for-profit health carriers: Aetna, Anthem, Cigna, Humana and UnitedHealthcare — themselves the product of mergers 20 years ago — are once again in the throes of another round of mergers.

Last month Aetna announced it was buying Humana and Wall Street awaits whether Anthem will merge with Cigna, or whether UnitedHealthcare will instead end up with Cigna.

Mergers mean fewer carriers and fewer carriers often mean higher prices — until a new crop of health underwriters injects a dose of pricing competition.

Wendell Potter, author, blogger and policy analyst for the Center for Public Integrity, said there are three reasons for the health insurance mergers: size, changing demographics and a shrinking employer-based health insurance market.

Mergers aren’t only taking place among carriers. They also are taking place among providers: hospital systems and doctors’ groups. A cottage industry of the group practitioners has sold larger groups who have become affiliated with large hospital networks, themselves the product of smaller hospitals fused with larger regional medical centers.

“Hospitals have merged with each other to regain the negotiating clout they lost temporarily after consolidation in the insurance industry,” Potter wrote in a July 13 blog post.

On Tuesday, Barnabas Health in West Orange, N.J., a health system with seven hospitals, and Robert Wood Johnson Health System in New Brunswick, N.J., with four hospitals, announced plans to combine their 11 hospitals to form New Jersey’s largest health system.

Potter also wrote that the growth of Medicare Advantage plans serving baby boomers means carriers need to position themselves to underwrite this growing and profitable segment — a segment in which Humana was particularly strong and Aetna relatively weak.

Health care reform has opened up a new avenue for individual to find coverage, which has led employees to opt out of their employer-sponsored plans.

Potter, a former spokesman for Cigna, said that when he left the company in 2008, about 85 percent of its members were enrolled in large employer-sponsored plans. But, he added, data published in June from the Urban Institute that found enrollment in employer-sponsored plans shrank 11 percent between 2000 and 2012.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].