Rates for individual health insurance for thousands of Nebraskans in 2014 are based partly on factors that are uncertain because of changes required by the Affordable Care Act, Nebraska Insurance Director Bruce Ramge said Thursday.
Those uncertainties likely will continue for another year, he said. The state's review of proposed individual policies in 2015 will start in February or March, only a few months after the 2014 policies take effect.
Ramge said it's unclear whether the uncertainty will mean higher or lower rates in 2015 than 2014, but several factors could push rates up. Policies can no longer exclude people with histories of high claims, for example, or set lifetime or annual limits on claims. Many of the new policies carry higher deductibles and out-of-pocket limits than old policies.
On the other hand, many of the people who will buy the new policies already have insurance, and companies know their claims histories — information that helps companies set accurate premiums.
But the main driver of insurance rates will continue to be medical costs, Ramge said.
Blue Cross Blue Shield of Nebraska, which accounts for about half of the Nebraskans who have health insurance, sent about 45,000 letters telling policyholders that their individual coverage will end Dec. 31.
The letters offered to replace the customer's coverage automatically with any of 14 new policies that start Jan. 1 and comply with the Affordable Care Act, also known as Obamacare.
Blue Cross spokesman Andy Williams said the letters were similar to renewal notices Blue Cross sends every year to its individual policyholders.
This year, the letters told the policyholders that if they did nothing, Blue Cross would automatically shift them to a different policy that complies with Obamacare standards, or they could choose one of the other new policies. In some cases, premiums and benefits were about the same, in some they were more and in some they were “a little less,” Williams said. He said he couldn't provide a breakdown of how many were in each category.
The pace of renewals this year may be slightly slower than usual because more people may be shopping for other policies or trying to navigate the federal HealthCare.gov website, Williams said.
About half the people receiving the letters may be eligible for federal tax credits that would reduce their monthly premiums, he estimated.
Large insured and self-insured group plans, which include most of the Blue Cross clients in Nebraska, won't have to change terms for 2014 or later under the Affordable Care Act, and don't have to include the same health benefits as the individual plans.
The State Insurance Department reviews health insurance plans every year to make sure that companies offer proper policies and charge enough that they will be able to pay claims.
Ramge, the state insurance commissioner, said the department's actuaries reviewed the policies that insurance companies filed for 2014, including monthly premiums and other features. The review process was complex enough that the department hired an outside actuary, from the Lewis & Ellis firm in Richardson, Texas, for advice.
Ramge said the new policies reflect the insurance companies' estimates of how many and what type of health treatments people will seek in 2013 and the cost of those treatments.
Monthly premiums for the new individual health insurance policies in Nebraska are roughly in the middle compared with other states, he said.
In the past, companies could set premiums according to a person's health status and a wide range of other factors, a process known as underwriting. For example, young women of child-bearing age usually paid higher rates because of the risk of maternity claims.
The Affordable Care Act limits those factors to age, place of residence and smoking status.
The law also limits the range of premiums. In the past, the highest rate could be seven times the lowest rate. Now that range is limited to three times, which means people at the high end may pay less than they used to and people at the low end may pay more.
If a company's premiums are too high, it won't attract customers. Too low, and it won't have enough to cover claims.
Actuaries made their best estimates in setting premiums for the new policies, Ramge said.
“It's not a wild guess,” he said. “There's a science behind it, but not as much as before.”