HealthCare.gov's leader wants to put his "stamp" on Obamacare health insurance prices next year—and that's raising suspicion he's worried they'll be too high otherwise.
Kevin Counihan, CEO of the federal health exchange, this week wrote a letter to state insurance commissioners who are reviewing proposed rate changes for Obamacare plans, suggesting they keep in mind several factors which, not surprisingly, could support arguments for approving only moderate overall price increases. Counihan's letter was first reported by Kaiser Health News.
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Counihan's unusual missive comes amid concerns that some—if not most—Obamacare customers will be hit with double-digit percentage price increases being sought by a number of insurers nationwide for 2016. Insurance commissioners will soon approve the final rates that will be charged customers both on government-run Obamacare marketplaces, and those who buy individual plans off those exchanges through brokers or the insurers directly.
Insurance commissioners in nearly all states have the power to adjust health plan rates after price proposals are submitted for a coming year by insurers. The federal government can only review rates of 10 percent or more in just five states and two U.S. territories whose commissioners don't have that authority.
"We have distilled several findings that we would ask you to carefully consider as you make your final rate decisions," Counihan wrote. "We ask that you consider these findings as you work to finalize rates for the 2016 plan year."
"We appreciate all that you and your staff do, and have the opportunity to do, to maintain affordability for consumers, while ensuring issuer solvency."
Read what Kevin Counihan told insurance commissioners here: July 21 letter
Counihan argued that newly enrolled Obamacare customers are healthier than the first wave of enrollees, and that insurers' "risk pools" are expected to get healthier, leading to lower average health claims per customer in plans.
And he wrote that the increase in the Obamacare penalty next year as well as the fact that people had to start paying fines for not having health coverage this past tax filing season, "should motivate a new segment of the uninsured who may not have a high need for health care to enroll in coverage." The Obamacare penalty for not having health coverage in 2014 was up to 1 percent of household income. It rose to the higher of $325 or 2 percent of income this year, and will jump again to the higher of $695 or 2.5 percent of income in 2016.
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Another factor that Counihan asked insurance commissioners to take into account was recent data showing that medical cost increases "remained moderate through the end of 2014 and into early 2015, even accounting for rapid growth in pharmaceutical costs."
He also cited two programs designed to lessen the costs Obamacare insurers are incurring from covering their customers, many of whom were previously uninsured. The federal Centers for Medicare and Medicaid Services recently announced that one of those programs would cover a larger share of costs from customers than originally planned.
Counihan added that "many states have found the use of public hearings helpful in rate evaluations."
A U.S. Health and Human Services Department official disputed the suggestion that Counihan wrote the letter out of fear that rates would rise too much next year. HealthCare.gov is run by the Centers for Medicare and Medicaid Services, which is a division of HHS.
"Based on preliminary findings for the coming year, we are confident that, overall, consumers will retain access to a wide range of affordable options in 2016," said the official, who spoke on the condition of anonymity. The official cited a projection by insurance companies that most Obamacare customers will be enrolled in plans with proposed rate hikes of less than 10 percent.
"The purpose of the letter is to reinforce the importance of active rate review and evaluation as part of [the Centers for Medicare and Medicaid Services'] going responsibilities in this area," the official said. "Active rate review can be extremely beneficial to consumers—in 2013, consumers saved approximately $1 billion and rates dropped by 8 percent in the individual market and 11 percent in the small group market thanks to rate review."
Despite HHS' arguments to the contrary, several insurance experts said Counihan's letter reflects legitimate worry that many 2016 rates will be significantly higher than now.
Kev Coleman, head of research and data for insurance comparison site HealthPocket.com, said the letter suggests, "The government is very concerned about the proposed rate increases, and the government is trying to aggressively arm state insurance commissioners with data to help them defend pushbacks on these proposed increases."
Robert Laszewski, president of Health Policy and Strategy Associates, said, "My first reaction is that they 'protest too much' if there isn't really a problem here."
"There is a problem, Laszewski said. "Not every carrier in every state but there is a clear pattern of the largest carriers with the most data having unacceptable financial results under the Affordable Care Act and responding with very large increases."
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"By sending this letter the administration is clearly saying they have a problem," he said. "But jawboning in the face of hard data showing unacceptable results is going to have very little impact."
"Counihan argues that the experience should improve as more people enter the risk pool. The problem with that is not nearly enough people entered the risk pool, in the 2015 open enrollment. More troubling, the states that had big surges the first year had little or no growth the second year—California, Washington, Colorado, New York for example. This has actuaries very worried." Actuaries help insurers set premium prices by calculating expected health costs from customers.
"Only about 40 percent of those eligible for the Obamacare insurance exchanges signed up through the second open enrollment," Laszewski said. "We need to be closer to 70 percent. By income category, only the poorest are signing up with less than 20 percent of those making between 251 percent and 400 percent of the poverty level signing up."
"These numbers are simply not sustainable."
HHS spokesman Benjamin Wakana, when asked about Counihan's letter, said: "While states are the primary regulators of insurance companies, CMS [Centers for Medicare and Medicaid Services] plays an important role in overseeing the health insurance markets and ensuring consumers have access to quality, affordable coverage. CMS also helps facilitate information sharing between states about best practices and important factors to consider during the rate review process."
Counihan's letter comes on the heels of a number of news stories highlighting some of the larger proposed rate hikes.
CNBC reported last month that one insurer, Texas Blue Shield, was seeking a nearly 20 percent price increase for Obamacare plans after losing $400 million last year insuring customers in those plans. Scott & White Health Plan in Texas has asked for rates as much as 34.12 percent higher than this year.
One recent HealthPocket.com analysis detailed by CNBC.com found that premiums for individual plans in major U.S. cities would rise by an average of 12 percent in 2016 if the newly proposed prices are approved.
But HHS noted that other analyses by the Kaiser Family Foundation and Avalere Health found that average proposed increases for low-cost silver plans, which are the most popular among Obamacare customers, show "modest" price hikes in the range of 4.4 to 5.8 percent.
And insurance companies are projecting that most people will be enrolled in plans with rates that are proposed to rise less than 10 percent.
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HHS officials have also repeatedly stressed the fact that more than 80 percent of the over 10 million customers on government Obamacare exchanges receive subsidies that help offset the cost of their coverage.
Those subsidies are worth an average of $272 per month, which means that a double-digit percentage increase in plan prices would lead to much less dramatic increases for many customers in absolute dollar terms.
However, millions of people buy individual plans outside the exchanges, where subsidies are not available.