End looming for southwestern Pennsylvania cut-rate health insurance [Pittsburgh Post-Gazette]
By Bill Toland, Pittsburgh Post-Gazette | |
McClatchy-Tribune Information Services |
Since 2011, small and mid-sized businesses have reported smaller-than-usual increases, and even cuts, in their health premiums costs.
In the short run, insurers offering artificially low premium rates to grab market share, sometimes known as "buying business," is a good deal for patients and for the companies that provide health care plans for employees by purchasing group polices.
But in the long run, prices ought to reflect the cost of care.
The long run has arrived, says
"That appetite to take [pricing] risks is changing quickly," he said. "Sooner or later, the financial people take over" and realize the rates being quoted by the sales teams are unsustainable.
Why were
For one, the two local health giants continue to jockey for customers in advance of their possible breakup, which could come as soon as the end of 2014 -- meaning it's possible that
Two: Less-than-typical health care utilization coming out of the recession gave a tailwind to health insurers, allowing them more flexibility on discounts.
And three: The insurers were responding to a newly competitive insurance landscape, driven by the UPMC (the hospital network, not the insurance plan) decision to give national insurers new and wider access into the local hospital and physician market. By giving Aetna,
Despite the new entrants, there hasn't been a great deal of shifting of major employer-based accounts, another reason some of the cut-rate pricing has eased.
"They have made a little headway in the market," said
That's because
For example, Aetna might make a pitch to
As a result, Aetna and the rest sat on the sidelines and picked their spots, he said, occasionally winning business from a large, self-insured company and waiting for pricing sanity to return.
It is returning now, in part, because prices can remain artificially low for only so long before eating away at income margins.
For example, in UPMC's latest quarterly report, the company revealed that its health plan's "medical loss ratio" -- the percentage of premium revenue that goes toward paying claims -- had grown from 89.4 percent in
That means it's clearing less from its insurance products, and spending more on claims.
Of the two companies,
"It seems like
On the other hand,
"UPMC is still loading up customers, at any cost," he said.
Pricing caution, to whatever degree it now exists here, is also being driven by federal health care reform. Underwriting rules are changing, pricing rules are changing, and insurers are trying to get a handle on them.
Dave Straight, founder and CEO of the Benefits Network, a local benefits broker.
"The carriers are about to face serious challenges in accurately predicting risk in the small-group and individual market segments next year," he said. "I don't expect that they will have much of an appetite for underwriting losses heading into unknown territory."
As a result, "My impression is that the carriers are taking a more conservative approach to rating of late,"
The
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