When individual health insurance plans go on sale on healthcare.gov next week, many Missourians will probably be more than a little shocked to see some rate increases as high as 40 percent.
Similar increases are popping up nationwide, but different states have different powers to address them.
Take Oregon, for example.
Each year around late April, insurance companies send the state their proposed rates, starting a conversation about what’s fair based on the cost of health care and the health of customers.
The public is invited to take part. Consumers can comment online, attend public forums, even listen in on conference calls between state regulators and insurance companies.
“Everything we do is public,” says Ethan Baldwin, a rate review policy analyst with Oregon’s Department of Consumer and Business Services. “The rate filings are on our website, the questions that we ask the company are on our website. Everything we do is transparent. There’s nothing that the consumers don’t see.”
After a few months, if the dialogue hasn’t led to a rate that the state thinks is reasonable, it can pull out the heavy artillery. The state has the authority to reject insurance companies’ rates.
“We do have the authority to reject rate increases, but that doesn’t happen,” Baldwin says. “I can’t remember the last time that’s happened.”
That’s Oregon. Then there’s Missouri.
Washington, D.C., lawyer Jay Angoff, who was head of the Missouri Department of Insurance in the mid-1990s, says he often learned how much insurance companies were charging only after their plans went on sale.
“We were no better or worse than anyone else,” Angoff says. “It was a unique situation. Some insurers would, even though they didn’t have the legal obligation to, they would submit filings to us, but there was nothing we could do.”
Angoff, who later served in the U.S. Department of Health and Human Services, was an advocate for Missouri’s new law that will allow the insurance department -- for the first time -- to review rates.
The Affordable Care Act actually requires reviews of any significant rate increase, but after that law was passed, Missouri punted and left it up to the federal government, which was sued in 2014 by a Missouri consumer group for doing less than stellar work.
“The federal government did not make rate filings public at all for several years. Even today, they black out much of the information in the rate filings that they do make public,” Angoff says. “So the hope is that Missouri will not only do a better job of reviewing the rates but will also do a better job of making rate filings public.”
But unlike Oregon, Missouri won’t be able to reject proposed rates, making its newly acquired authority somewhat toothless.
A study of California insurance estimated that rate reviews in that state saved buyers there an average of about $83 million annually over the last five years. But customers would have saved about 50 percent more if California had been able to reject proposed rates.
In dozens of cases, insurance companies ignored the state reviews and instead raised rates as they wanted.
Angoff admits that rate review by itself can only do so much. But merely by creating some transparency where none existed before, he says, it’s a big step.
“It’s not everything. It’s not a whole loaf. But for the first time, the insurance commissioner does reviews of rates and insurance companies will have to file their rates, and the public will get access to the justification for their rates,” Angoff says.
But before rate review in Missouri kicks in, Missouri may have to address another problem: diminishing competition.
“Competition is key. Without competition, the other tools won’t work and don’t work,” says Saint Louis University law professor Sidney Watson, who specializes in health law.
The Missouri Department of Insurance relies on the free market to keep health insurance costs for individuals in check, but many insurers have withdrawn from the Affordable Care Act marketplace.
This summer, insurance giants Aetna and United Healthcare pulled out of Missouri. Some critics say Aetna and United were retaliating against the government for opposing their proposed merger. The insurers, however, say they were losing money because they didn’t have enough healthy customers signing up.
“It’s disappointing that two major insurers pulled out of the market this quickly without working with the government to figure out how to make those programs work,” Watson says.
The upshot was a dramatic reduction in competition, leaving 85 percent of Missouri counties with just one company selling plans, according to one estimate.
With Aetna and United gone, Blue Cross Blue Shield of Kansas City and Anthem Blue Cross Blue Shield of Missouri dramatically revised some of their proposals.
Blue Cross Blue Shield of Kansas City declined to say why it jacked up rates from 23 to 40 percent for some of its plans. But Anthem Blue Cross Blue Shield says it needed to accommodate a rush of costly customers it expects Aetna and United have left behind.
So what does it all mean for the quarter of a million Missourians expected to buy insurance on the Affordable Care Act exchange in coming weeks?
In fact, they’ll largely be shielded from the higher rates because their subsidies will also rise. But the cost of those higher subsidies will be shouldered by taxpayers, who fund them.
“While the subsidies protect the individual, we have a collective interest in these premiums being fair and not being priced higher than they need to be,” Watson says.
The market is now set for 2017, but things may yet change in future years. Watson says more insurers may be interested in selling plans in Missouri.
And beginning next year, Missouri’s insurance department will get to flex its new authority. It won’t match Oregon’s, but it’s a start.
Alex Smith is a reporter for KCUR, a partner in the Heartland Health Monitor team. You can reach him on Twitter @AlexSmithKCUR