Were health insurers to experience tough financial pressures, clinical laboratories and pathology groups could see a scale-back in medical lab test payments for 2016 and 2017
Will health insurance premiums skyrocket in 2016 for health plans offered through the Affordable Care Act? That’s a tough question to answer, given that projected increases are substantial in some states and moderate in other states.
The answer to this question is an important one for clinical laboratory executives and pathologists. If health insurers pay out more in claims than they receive in premiums, they generally try to balance the books by paying providers less. That includes medical laboratories.
There is credible evidence that premiums in some states may increase dramatically for 2016. Even as the Obama administration pressures states to keep rates from rising too fast, many insurers are struggling to remain financially viable after discovering that those enrolling in the Obamacare marketplace continue to be less healthy than anticipated.
One consequence from health insurers that face mounting financial pressures is that they could be inclined to exclude higher-priced clinical laboratories and pathology groups from their networks. Also, as noted earlier, they could reduce the amount they reimburse for lab tests.
In Some States, Health Insurance Rate Increases May Be as High as 50%
Insurers’ rate increase proposals made headlines this spring when some state exchanges announced they were receiving requests for premium hikes as high as 50%. In New Mexico, market leader Health Care Service Corp. asked for an average increase of 51.6%, while Tennessee’s biggest insurer, BlueCross BlueShield, requested a 36.3% boost.
Because state insurance commissions must review—and can potentially reject—proposals to increase premiums by more than 10%, the Obama administration has asked state regulators to scrutinize rate requests.
Kevin Counihan, Director & Marketplace Chief Executive Officer, Centers for Medicare & Medicaid Services, sent a letter to state insurance commissioners in July outlining reasons for supporting only moderate increases in premium costs.
Mixed Success in Attempts to Control Health Premium Increases for 2016
Thus far, efforts to rein-in rate increases for 2016 have been mixed. Oregon, which was the first state to announce final rates, will see premiums increase by an average of 24%, slightly above what insurers had requested. Oregon’s Insurance Commissioner determined that some of the rates filed were too low and would not meet projected claim costs, Healthinsurance.org reported.
California, meanwhile, announced a modest 4% rate increase in rates for its individual healthcare marketplace, Covered California. This would be a slight decrease from 2015’s 4.2% premium rise.
“We have Chicken Littles who keep saying the sky is falling tomorrow,” Peter Lee, Executive Director of Covered California, told the Los Angeles Times. “We are proving competition drives prices down.”
Unlike most other states, California actively negotiates with insurers over rates and does not automatically allow every company to sell in its marketplace. Lee told the Los Angeles Times that the state’s negotiations lowered premiums by about $200 million compared with what the plans originally sought.
Pressures on Payers to Keep Premiums Low “Unrealistic”
Yet not everyone believes arm-twisting insurers to keep rates low is good for the long-term health of the exchanges.
“You cannot have every doctor in your network, very low copays, broad benefits, and lower costs. It just can’t work that way,” declared Holland in an article published on Bloomberg BNA.
All told, more than 450 insurers are requesting rate increases of 10% or more for 2016. This is a steep increase from the 151 insurers who pursued double-digit increases in 2015, according to research by the National Center for Public Policy Research, a Washington, D.C.-based conservative think-tank.
“This year, health plans have a full year of claims data to understand the health needs of the exchange population, and these enrollees are generally older and often managing multiple chronic conditions,” observed Clare Krusing, Director of Communications, America’s Health Insurance Plans, in a story published by the Wall Street Journal. “Premiums reflect the rising costs of providing care to individuals and families, and the explosion in prescription and specialty drug prices is a significant factor.”
2017 Rate Hikes for Health Insurance Premiums Could Be Even Higher
Some healthcare experts predict that this first round of double-digit premium increases may be only a prelude to what lies ahead in future years
“The increases for 2016 will impact consumer behavior,” David Hogberg, Ph.D., Health Care Policy Analyst for the National Center for Public Policy Research said in a news release. “Some of the healthiest people facing these hikes will probably flee to cheaper insurers. That will leave [those] insurers with big rate hikes in 2016 with an even older and sicker risk pool, forcing them to hike rates even more for 2017.”
Now that insurers are no longer able to deny coverage or charge higher premiums based on pre-existing conditions, on January 1, 2017, insurers also will face the sunseting of two of three provisions in the ACA that promoted market stability: risk corridors and reinsurance. Only risk adjustment is a permanent part of the ACA.
In a guest post published in Forbes, Robert Laszewski, President of Health Policy and Strategy Associates LLC, a policy consulting firm based in Washington, D.C., predicted that the “real Obamacare rates” will be revealed in mid-2016 when the 2017 prices are published.
“By then health plans will finally have had a couple of years of credible claim data and two of the ‘3Rs’ subsidizing the insurance companies will have gone away,” he wrote.
Could Rate Increases Hit Double Digit Levels for 2016 and 2017?
If it proves true that there are double digit increases in health premiums in many states for both 2016 and 2017, it will probably not be auspicious for the clinical laboratory industry. That’s because, historically, when medical claims exceed projections, health insurers attempt to recoup those losses by forcing price cuts on hospitals, physicians, and medical laboratories.
—Andrea Downing Peck