Health rate filings crack open PPACA window

Insurers have already had coverage in place in markets subject to the Patient Protection and Affordable Care Act (PPACA) product design and underwriting rules, and, for the most part, the effects of PPACA on product performance are still a mystery.

Most of the publicly traded health insurers have big large-group operations, which were only minimally affected by the PPACA mandates and programs that took effect Jan. 1, 2014. Most have reported results for the individual and small-group operations much more directly affected by PPACA together with the results for the large-group operations.

Some insurers have broken out individual results, small-group results, or both, but many of those have combined the results of:

exchange products that comply fully with PPACA;
off-exchange products that comply fully with PPACA;
off-exchange products that have official "grandfathered" status under PPACA, because they were already in place on March 23, 2010;
and off-exchange "grandmothered" products that are operating under state and federal rules that give them temporary permission to avoid complying with many of the new PPACA rules.

When insurers filed their major medical rates for 2015, they mostly used actual experience data from 2013 or earlier, and theoretical projections of how experience might have looked in 2014.

The California Department of Insurance has drawn attention to one filing, based partly on 2014 experience data, that gives estimates for how much PPACA-related taxes and fees will cost in 2016.

We also found a filing for a group of grandfathered small-group plans in Oregon that provides 12 months of 2014 experience data.

For a look at what we could find about PPACA World in the filings, read on.

1. PPACA risk-management program costs will change.

Anthem Inc. (NYSE:ANTM) is raising rates on some grandfathered individual policies issued by the Anthem Blue Cross Life and Health Insurance Company unit by an average of 8.7 percent. The policies cover 110,000 California residents.

Actual changes would range from a decreases of 37.4 percent to an increase of 24.9 percent. The California department has called the largest increases unreasonable.

The new rates, which took effect April 1, affect about $543 million in written premium.

A year earlier, Anthem increased on the policies 16.4 percent.

Anthem says in the rate filing that it expects the amount it pays for the PPACA reinsurance program, which is supposed to protect PPACA-compliant plans against catastrophic enrollee claim costs incurred in 2014, 2015 and 2016, to be $3.67 per member per month in 2015, and $2.29 per member per month in 2016.

The plan's share of the PPACA health insurer tax load could eat up 3.5 percent of premium revenue.

Health Net Inc. (NYSE:HNT) has included similar numbers in a rate filing affecting grandmothered small-group plans in Oregon with about 12,000 enrollees and $88 million in written premium.

Health Net is asking for an average increase of 7.82 percent in that filing.

Health Net says it expects its average PPACA reinsurance fee to fall to $2.49 in the fourth quarter of 2015, from $3.67 per member per month earlier in the year, and for its share of the health insurer tax load to amount to about 1.84 percent of premiums before tax implications are considered.

2. Anthem and Health Net are putting put some 2014 experience data, and even 2015 data, in filings for rates with mid-year effective dates.

In the public version of the filing for individual grandfathered policies, Anthem gives some experience data for a period that started Aug. 1, 2013, and ended July 31, 2014.

During that period, the blocks of business included in the filing had medical loss ratios ranging from 52 percent of premiums, for a basic policy that covered 1,197 people, to 97 percent, for a health account plan with maternity benefits that covered 2,201 people. The average medical loss ratio for the policies during the experience period was 74.9 percent.

The projected profit margin would be 0.1 percent without the rate increase, and 3.2 percent with the increase.

Health Net has given monthly enrollment and paid-claims figures for the period from January 2012 through January 2015 in the public version of the grandmothered small-group plan rate filing.

Figures for normalized per-member per-month benefits costs, which are adjusted for a variety of factors that could otherwise throw off comparisons, increased to an average of $400.12 in 2014, up 9.2 percent from the 2013 average, but up just 6.8 percent from the 2012 average.

Health Net notes in its filing that the underlying medical cost trend fell to 6.9 percent, from 7.5 percent, over the past two years. Part of that decrease seems to be due to a drop in Oregon providers' need to compensate for "bad debt," or patients' unpaid medical bills, and it's possible that PPACA helped decrease the level of bad debt, the company says.

3. Insurers may not post much more 2014 experience data until the summer, when they're starting to file their 2016 rates.

The U.S. Department of Health and Human Services (HHS) is asking insurers to file rates for individual plans in the states in which HHS handles rate regulation by May 15. HHS hopes to post information about any requests for increases of 10 percent or more by June 1.

Health rate filings crack open PPACA window

1. PPACA risk-management program costs will change.

2. Anthem and Health Net are putting put some 2014 experience data, and even 2015 data, in filings for rates with mid-year effective dates.

3. Insurers may not post much more 2014 experience data until the summer, when they're starting to file their 2016 rates.

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Health rate filings crack open PPACA window

1. PPACA risk-management program costs will change.

2. Anthem and Health Net are putting put some 2014 experience data, and even 2015 data, in filings for rates with mid-year effective dates.

3. Insurers may not post much more 2014 experience data until the summer, when they're starting to file their 2016 rates.

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