When last week we showed how much the average health insurance premium proposal would rise in a 14 select states...
... but one state was missing: Texas, which is the health-care law's third-largest market behind Florida and California. We now may have found the reason why.
According to the Houston Chronicle which cites federal regulator filings, Blue Cross and Blue Shield of Texas - the state's largest insurer - has asked for rate hikes of nearly 60% for next year in three popular HMO plans. According to filings listed on healthcare.gov, Blue Cross and Blue Shield seeks increases between 57.33 percent and 59.35 percent for two of its Blue Advantage Plus plans. A Blue Advantage Health Maintenance Organization Plan is asking for a 58.6 percent hike.
The company, which is the only carrier to offer health coverage in all of Texas' 254 counties, would not specify Wednesday what would happen if does not get the rate increase it says it needs. "No final decisions have been made regarding our 2017 Texas offerings," spokesman Gustavo Bujanda said in a statement emailed to the Houston Chronicle.
"The rates we have submitted for review and approval are supported by strong actuarial principles, science and data," the statement continued.
The company said in its request that the hike could affect nearly 603,000 Texans buying individual policies through the federal exchange mandated by the Affordable Care Act. It is not known what increases will be requested for employer-sponsored group policies. "The anticipated health risk of the people in any given market is the largest component of determining rate changes," the company statement said.
Judging by the soaring premium, the "health risk" is likewise going through the roof: risk which it appears nobody had anticipated five years ago when the ACA tax was passed.
BlueCross is not alone: insurers across the nation have complained vigorously that they are losing money in the federal exchanges as some customers have proven more costly to cover than anticipated. Under the health-care law, an insurer can no longer deny coverage to someone based on her or his health status or pre-existing condition.
Texas Department of Insurance spokesman Ben Gonzalez confirmed his agency had received requests for rate hikes, but he said that because the insurer had marked them "confidential" he was unable to comment on the amounts. He said the department is "going to go back to ask more questions."
To be sure, the Texas administrator is stumped by this soaring premium request: in Texas a rate request, especially one so large, must be deemed "not excessive, unfairly discriminatory and premiums must be reasonable in relations to the benefits provided," Gonzalez said. In other words, he said, the agency will ask, "Is it justified, does the company need this?"
Something tells us that the answer is yes, and that this is only the start of even greater rate increases in coming years as the full impact of Obamacare on insurer top and bottom line is unveiled.
Even if Texas balks at the rate increase demand, it likely can do nothing about it. Stacey Pogue, a senior policy analyst at the Center for Public Policy Priorities in Austin, said Texas typically lacks the teeth in its insurance regulations to block a rate increase. "There's not a process in Texas for it to be denied," she said.
Ironically, the rate request may esclate all the way to the Federal level since Texas is one of five states that does not determine its own rate reviews for the federal exchange. Instead, any rate hike request is checked by the Insurance Department to make sure it complies with state law and is considered "actuarially justified." The request then moves to the federal level, for the U.S. Health and Human Services Department to conduct the rate review for exchange plans. While HHS can ask for an adjustment, in practice the final rate increase is typically left up to the insurance company, Pogue said.
"Even if they find it unreasonable they can't stop it," she said.
* * *
Going back to the reason for the rate hike request, it is simple: the insruance company is spending far more than it is bringing in. Blue Cross and Blue Shield of Texas, for example, has said it lost $321 million last year in the individual market, both on and off the exchange, and that it spent $1.26 for every $1 it took in. The loss was also less than the $400 million loss it reported in 2014. It was due to those losses that the insurer said it was necessary to drop all preferred provider organization plans, typically favored by those with greater medical needs, across the state. Many of those who lost PPO coverage, including 88,000 in Houston, were shifted to HMO plans.
Other insurers won't even bother asking for rate hikes. Instead companies such as America's largest insurer, UnitedHealthcare, has said it plans to leave the exchanges in 2017 in Texas and most other states, has predicted it will lose about $650 million in the Affordable Care Act marketplace this year. Humana warned earlier this month it plans "a number of changes … to address the significant risk selection issues we have and continue to face." The company reported a 46 percent loss in the first quarter of 2016, but analysts have said some that is due to expenses involved in a takeover bid by Aetna. Cigna has called its participation in the exchanges "contingent upon future market conditions and approval of our regulatory filings," according to a previous email to the Chronicle.
To be sure, this won't be Blue Cross and Blue Shield's first rate hike request. Last year Blue Cross and Blue Shield of New Mexico, a division of the same parent company of Blue Cross and Blue Shield of Texas, asked for a 51 percent rate increase for its exchange plans. When New Mexico insurance officials refused, the company withdrew all individual plans from the state.
Withdrawing from Texas, which is the health-care law's third-largest market behind Florida and California, may be more problematic for all involved..
Meanwhile, the government, realizing it has made a big mistake, is putting the onus on "the people" to push back:
Wichita Falls insurance broker Kelly Fristoe told the Associated Press that people in rural areas of Texas will be the hardest hit by the rate increase because Blue Cross and Blue Shield is often the only option in remote areas. Pogue said insurance regulators in many other states are more aggressive against large rate increases. "We need people who can push back in Texas," she said.
Yes, the people - many of whom can not afford a 60% surge in their insurance costs - will push back, and it will be the only way they can: with their wallet. Which means either billions in diposable income will be removed from other sector of the economy (leaving economists stumped why retail spending is plunging) or will be forced spend much more on Obamacare. The silver lining: healthcare spending is on pace to surpass housing as the single biggest contributor to GDP. A few more quarters of Obamacare and it will be there.