Capital New York
August 4, 2014
Behind New York’s 2015 Health Insurance Rates
New Yorkers who purchased insurance from the state's much-touted health insurance exchange could see their premiums rise by as much as 19.7 percent or drop by as much as 12.9 percent in the coming year.
The wild swing in fortunes are a product both of the Affordable Care Act, which had provisions designed to narrow gaps between premium prices, and by the reality that insurance companies are navigating uncharted waters.
Though rate proposals, which are only requests, are backed by figures calculated by actuaries, some of the companies on the exchange told Capital they are still relying on guesswork to come up with their rates until they develop a better sense of the new market. Some said they would not have a clear idea until next year’s rate filings.
“Not to say there won’t be any issues going forward, but it appears that we’ve gotten through the harder lift and we should be able to more accurately price and make business decisions around the markets in the next year,” said Bob Hinckley, chief strategic officer for Capital District Physicians’ Health Plan (CDPHP).
Eleven insurers asked for raises, while four asked for decreases, and one is dropping out of the public exchange altogether.
Below is an interactive pie chart showing the proposed rate increases alongside the company's market share. Capital chose to show the market share because our analysis shows that the rate increases were positively related to the market share—the higher the market share the higher the proposed rate increase.
The New York State exchange is a creation of the Affordable Care Act. Insurers offering plans through the exchange opened enrollments last October and attracted over 370,000 people. Plans began to take effect almost seven months ago, on January 1 this year.
With insurers requesting such widely varying rate changes this year, and likely to make different requests again next year as they adapt to the new network, New Yorkers, who will be automatically enrolled in their current plan unless they opt to change, would be well advised to take another look at the offerings across the board, particularly because some of the companies that enrolled the most people are asking for the largest increases.
The insurer with the biggest price decrease request of 12.9 percent, Affinity Health Plan, had a 1 percent market share this year. In a letter to customers, Affinity said they “went back to the drawing board” to come up with rates that were affordable.
Harris Brandt, AVP of corporate communications for Healthfirst New York, is asking for a 10 percent drop in rates, citing a different demographic than what the company had anticipated.
United Healthcare, asking for a near 6 percent decrease, did not respond to request for comment.
All insurers asking for rate increases pointed to higher costs of care, for example prescription medicine prices, and the cost of taxes and fees.
Though taxes are expected to be the same for all insurers, that uniformity did not translate into similar rate increases, and most companies told the state's Division of Financial Services, that taxes and fees were only a small part of what made up their rate request.
Two of the companies requesting higher percentage rises, MVP and MetroPlus, indicated their costs and customer base are turning out to be different from what they expected when they set their initial prices. They’re looking for increases of 19.1 percent and 18.8 percent on average respectively, on premiums that are on the lower to mid range compared to others.
The bar chart below shows the proposed rate increases for the different plans—platinum, gold, silver, and copper along with the market share. Like the pie chart above, this chart also shows the relationship between market share and rate increases.
“I think to some extent it was really difficult to anticipate what we were going to get, because nobody knew,” said Kathryn Knox Soman, director of communications for MetroPlus.
Soman said the increase is partly driven by the fact that they enrolled more people than they expected to in New York City. MetroPlus, which captured about 44 percent of the city market, operates on the exchange in the Bronx, Brooklyn, Manhattan and Queens.
“In every single market that we were in we actually were market dominant,” said Soman. “In the under 35 market we came in, probably somewhere over 50 percent of our entire base is under 35.”
Given the young population MetroPlus has enrolled, they said they are expecting to pay more into the state’s risk adjustment pool—that is, a fee paid by insurers with younger, healthier members to go towards covering the needs of older, sicker members.
The idea behind that part of the law was to avoid having a company game the system, and seek out only the youngest, healthiest people. The risk adjustment money is one way in which the law seeks to close the gap between plan prices.
Soman said it is too early for the company to say whether the younger demographic they have attracted is in fact as healthy—or low-cost—as the risk adjustment system presumes.
“The theory was that they would be less expensive to insure and therefore their premiums and their payments would help subsidize the members who are older, sicker, whatever,” said Soman. “And so we don’t know if that’s really going to happen because you know it’s the prime age for women to have babies, for example, which is not cheap, and all that sort of stuff.”
In 2014, there was almost a $500 per month difference for a silver plan (the most popular of the four tiers chosen by New Yorkers) between United Healthcare's at $803 per month and the Freelancers, which offered a silver plan for $307 per month. In 2015, United is dropping its silver plan costs by about 6 percent while the Freelancers, which captured the most market share in 2014, are raising there silver plan premium by about 7.5 percent. United did not respond to requests for an interview.
In 2015 proposed rates for silver plans, the difference between the most expensive and cheapest silver options has fallen by about 10 percent to $450 per month.
MVP did not respond to a request for an interview but in their DFS submission they said, “Some assumptions that MVP made in setting premium rates for 2014 need significant modification,” including the general cost of care, “the value of certain benefit plans”, and anticipating costs from the Federal Risk Transfer Program.
That was a theme that ran though several of the insurers Capital spoke with.
Though most of the insurers asking for the largest percentage rate rises were the companies with high enrollments and lower fees to begin with, there were a few that did not follow this pattern.
The highest percentage increase came from Excellus, which wants to raise premiums by an average of 19.7 percent in 2015. The company has captured 4 percent of the market in New York State, and its current offerings are mid-range in terms of their actual price.
DFS has received 195 pages of comments from Excellus members saying the rates being proposed by the company are excessive.
Excellus spokesperson Jim Redmond told Capital in an email, “It's important to note that the proposed rates are simply break even. There is zero profit margin built into the proposed rates.”
The one company choosing to withdraw from the exchange for the coming year, American Progressive Life & Health Insurance, said it was because they enrolled too few members to make their plans viable.
Not all insurers said they found it difficult to correctly price their plans this year.
North Shore-LIJ Care Connect, also with a 1 percent market share, said they were able to more or less accurately predict and set appropriate prices for their premiums already in 2014, and are requesting a less significant rate adjustment for next year, a decrease of 1.3 percent.
“We had a number of experts we hired and analyzed the market ... between that relationship and our ability to manage care and having a reasonable assumption of the type of population, we were able to keep costs down," said Alan Murray, president and CEO of North Shore-LIJ Care Connect.
North Shore-LIJ also had a large proportion of members take up Platinum memberships—the most expensive—which could indicate that their customer base was generally better off and therefore in better health, and lower cost to insure. The average age was 41, which Murray said indicates a fairly healthy demographic.
The company does plan to increase their market share, expanding to offer plans in Westchester, Bronx, Manhattan and Brooklyn in the coming year—perhaps another factor in wanting to slightly lower their prices.
Another factor in the variations in rates could be the different levels of experience that plans have in offering individual plans in New York. Some insurers had experience providing private individual plans before the public exchange came into existence, whereas for others offering individual plans was a completely new area.
“They didn’t have an experience to base their rate projections on, and so they really were doing a good faith, best estimate they could, based on information that was available,” said Leslie Moran, spokeswoman for the New York Health Plan Association, the trade body that represents all insurers on the public exchange in New York except Excellus and Empire.
She said plans like HealthFirst, Fidelis and Health Republic were offering individual plans for the first time, as opposed to others like MVP or Excellus.
Moran said rate changes may also have been different because some companies were factoring in losses in 2013 and expected losses in 2014.
A major underlying reason for the fluctuations, though, was a lack of experience and information when the rates were being proposed, according to Moran.
“This year, they were working off of January through March is when they really started the process of doing the new rate calculations, so they only had maybe three and a half months of experience on which to build their rate projections,” she said.
In addition to the fifteen continuing on the market, two insurers are entering the public exchange for the first time in the coming year: Freelancers Union and WellCare.