Health insurers are starting to submit, for state review, their premium rates for the coverage they will offer in the individual and small group markets next year, when the major components of health reform take effect. The latest batch comes from Maryland, where the largest insurer, CareFirst, has asked the state for a 25 percent average rate increase for its 2014 individual-market plans compared to its 2013 products. Health reform critics may cite this as the latest evidence of so-called “rate shock,” but a closer look at the CareFirst proposal shows that isn’t the case.
The 25 percent average increase that has received so much attention is an average across all of the plans that CareFirst and its affiliates will offer. Notably, CareFirst is assuming that 80 percent of the parent company’s 2014 expected enrollment will be in plans offered by BlueChoice, for which CareFirst is predicting an average 12 percent annualized rate increase compared to 2013. That’s not insignificant, but it’s in the range of the increases people in the individual market have typically seen before health reform.
Sixty percent of CareFirst’s 120,000 members in Maryland’s individual insurance market are enrolled in “grandfathered” plans that don’t have to comply with some of health reform’s major changes yet and so aren’t affected by the requested increase.
Consumers care most about what they actually pay for coverage, and these filings don’t show that. The premiums that people will pay will be based on additional factors such as age and geography. And as we have written previously, a large share of the people in the individual market, including the young and healthy people that insurers want to attract, will get substantial help paying premiums through the tax credits that health reform will make available.
Catastrophic plans will be available for people under age 30 and certain other groups. So the relatively small share of young and healthy people who won’t be eligible for subsidies and are willing to assume the risk of much higher out-of-pocket costs have a lower-premium option. The BlueChoice Young Adult plan (with a $6,350 annual deductible) has an average per-member, monthly rate (according to the preliminary filings) that is roughly half the rate of a mid-range plan with a $2,000 deductible that is open to people of all ages.
Maryland’s Insurance Administration must still review CareFirst’s request, determine whether the proposed rates are based on reasonable assumptions, and decide whether to approve the proposed rates, with final prices becoming available to consumers by this fall.