Insurers gear up to market new plans on exchange
By JIM McLEAN
By JIM McLEAN
KHI News Service
TOPEKA -- Kansas insurance companies are preparing to sell a range of health plans on a new, online insurance exchange being created by the federal government in an effort to make coverage more available to the thousands of people who have struggled to obtain it.
The Affordable Care Act, often referred to as Obamacare, requires the new health insurance marketplaces to be up and running in every state by October, with the coverage sold through them effective on Jan. 1. But large numbers of Americans who stand to benefit most from the exchanges still know little to nothing about the law or how it will affect them, according to a recent poll by the Kaiser Family Foundation.
Anyone will be able to use the online marketplaces to purchase health coverage, but they are being created mostly to make private coverage more affordable for the uninsured and individual policies more widely available to those who don't have access to group coverage through an employer.
"It's going to create new opportunities for people who don't have any insurance at all," said Andy Corbin, chief executive of Blue Cross Blue Shield of Kansas, the state's largest private health insurer. "And for those who don't make much money, it may save them some dollars."
Corbin said plans offered on the exchange will "probably be more expensive" than the individual and small-group policies the company now sells. But he said in many cases the amount consumers actually pay would be lower because of federal subsidies.
The exchange, or marketplace, also will give small businesses -- those with fewer than 50 employees -- new options. Rather than purchasing group insurance, they will be able to select a plan on the exchange and allow their workers to purchase individual policies. The businesses will have the option of helping their employees pay for the coverage, or not.
At least three insurance companies will sell multiple plans on the Kansas exchange, which will be operated by the federal government because Gov. Sam Brownback, a Republican opponent of the health reform law, declined to establish a state-run exchange. The companies are Blue Cross Blue Shield of Kansas, Coventry Health Care of Kansas and Blue Cross Blue Shield of Kansas City, which does business in two Kansas counties, Johnson and Wyandotte.
Subsidies to blunt higher premiums
Ron Rowe, a vice president for BCBS of Kansas City, predicted the cost of premiums for new, non-group policies would trend higher.
"Some people's rates are going to go down and some are going to go up, but in aggregate it's going to be about a 30 to 35 percent increase for that entire block of business," he said.
But those increased costs could be mitigated for many. People who already have individual policies can keep them. And those who qualify for federal subsidies could end up paying less for more expensive and more complete coverage.
"Many people who are going to see big, high rate increases are going to qualify for a subsidy," Rowe said. "And the amount that they're going to pay out-of-pocket, net with the subsidy next year, will be less than they're paying today even if the premium is significantly higher."
For example, a person with annual earnings equal to 150 percent of the federal poverty level -- $17,235 -- would pay about $460 a year for a $5,000 policy, according to a cost-estimating tool developed by the Kansas Insurance Department. Federal tax credits paid directly to the insurance company would cover the remaining $4,540.
The credits, available only through the exchange, will be calculated on a sliding scale up to 400 percent of federal poverty guidelines, or annual earnings of $45,960 for an individual. But at that top level, the subsidy would amount to only about $630 leaving the consumer responsible for the remaining $4,370.
Despite the likelihood that many consumers purchasing through the exchange could pay less, both Corbin and Rowe said they anticipated a backlash from those forced to pay more.
"We're trying to get out in front of the negative that's going to come," Corbin said.
To do that, he said, the company planned to do as much as it could to educate consumers about the exchange, the subsidies available and why some coverage would cost more.
Higher risks mean higher costs
Premiums are expected to rise because the reform law prohibits insurance companies from continuing practices they have historically used to reduce their risks. Those practices include denying or limiting coverage for high-cost individuals or capping their benefits. Going forward, the companies must sell policies to anyone regardless how sick they might be.
Kansas Insurance Commissioner Sandy Praeger, a Republican who has bucked the party line in supporting the law, said the old system often denied affordable coverage to people who needed it most.
"If you had any kind of pre-existing condition, you probably couldn't buy (insurance) at all," Praeger said. "You could be denied coverage because of allergies."
The reforms, Praeger said, also create financial incentives for insurance companies to work with doctors, hospitals and other providers to keep people healthier.
"The old system avoided risk, now they have to manage it," she said. "So, I think you're going to see a much more active partnership with health plans and providers to monitor quality."
If that happens, the cost of coverage should stabilize or increase more slowly, Praeger said.
Participation of young adults critical
Convincing younger adults to purchase coverage is a way that insurance companies hope to spread their risk.
But technical language in the law that limits how much companies can charge based on age will have the effect of raising premiums for adults under age 30 and lowering them for older, sicker individuals.
"It basically takes the way that we rate products today and kind of turns it upside down," Rowe said.
That has federal officials and insurance executives alike concerned that young adults will opt to pay relatively small penalties instead of buying insurance.
To prevent that, the law also allows companies to sell so-called "catastrophic" policies to young adults. The cheaper policies would protect individuals against major health care expenses but require them to cover more of the cost of routine care.
"That should offset some of the potential rate shock for younger people, if they're healthy," Praeger said.
Overall, Praeger said she thought that the reform law would benefit consumers.
"I'm going to look at the glass as half full," she said. "I just have to believe that over time it's going to be positive."
* KHI News Service reporter Dave Ranney contributed to this story. KHI News Service is an editorially independent initiative of the Kansas Health Institute.