(This is the 4th in a series of blogs on health insurance rate review)
As we explained in our earlier blog posts, health insurance companies are starting to submit to state and federal officials information on what health insurance plans they will offer and at what price.
A major factor in how insurers decide what prices to charge is the projected medical trend. Simply put, medical trend is the annual change in how much insurers spend on healthcare claims, which can go up or down. So, if insurers know that an MRI cost $1,000 two years ago and this year it cost $1,500 then they might assume that the medical trend is a 50% increase. That knowledge—combined with information about cost changes in other areas of healthcare—would be used to estimate how much insurers will pay in medical claims next year. (Of course that’s an example we made up and it’s much more complicated.)
The two main elements insurers use in calculating medical trend are the price paid to healthcare providers (unit cost trend) and changes in how much medical care is used (utilization trend). Health insurers are required to submit information to regulators on these trend projections they used in their calculation as part of their justification for a change in health insurance rates.
Basically, insurers use information they have about past payments to estimate future payments. Actuaries (a.k.a. number crunchers) have a broad amount of discretion in determining this variable and it is up to regulators—and consumers—to make sure these calculations are reasonable.
That’s why it’s critical that we have access to the background information that insurers submit with their rate filings. However, as of June, 2014, it is unclear when (or if) this information will be publicly available.
For a comparison with what insurers are stating as medical trend, you can look at information published by others on what’s really happening with rising prices. Figures released by the White House, Congressional Budget Office (CBO) reports, and analyses like this report by the Kaiser Family Foundation provide good independent comparisons.
Without going into the nitty-gritty of government economic reports, consumers can apply common sense when submitting comments on insurers’ rate increase requests. For a number of reasons, the experts at Consumers Union do not expect a steep increase in medical trend in 2015, including:
- Insurers already anticipated a spike in healthcare usage in the first year of the health insurance mandate (2014) and built that into their 2014 rates, and it is unlikely that there will be another large spike in 2015;
- The sickest and previously-uninsured Americans likely would have enrolled as soon as they could for 2014 coverage. Therefore, those waiting to enroll in 2015 will likely be healthier and therefore utilize healthcare less and have less costly needs; and
- The federal government’s set of programs created within Obamacare will help insurers mitigate the risk of the new changes in the health insurance market.
The period between when rate filings are submitted and when rates are finalized is your chance to get involved. Even if you aren’t ready to jump into medical trends reports, you can still get involved with a quick comment about how proposed rate changes would affect you and your family. For details on what information is available in your state, check out our guide. Want to know more than that? Head over to our rate review resources webpage. To join our movement and receive periodic updates and communications from Consumers Union Advocacy on this and other topics of interest to consumers like you, click here.
Once you take action, please let Consumers Union know by emailing dena [dot] mendelsohn at consumer [dot] org or tweeting to @CU_Health. And don’t be shy: let everyone know the steps you take to contain health insurance rates by tweeting with hashtag #ratereview2015.