Some health-policy costs spike

Premiums for certain types of health insurance have started to escalate more rapidly than in recent years even though very few parts of the new federal health care law have gone into effect.

While some industry observers say it's too early to predict how broad the impact will be, others fear that the rate hikes hint how the Patient Protection and Affordable Care Act will rearrange the insurance market.

Many of the law's sweeping changes will not take place for months or even years and have not been defined by federal regulations. Insurance companies have not yet submitted any new rates for approval by the Nevada Division of Insurance, an agency representative said, and may not until autumn. Most plans renew annually on Jan. 1.

But local brokers report instances of small groups or individual coverages where premiums have risen in percentages from the mid-teens to the mid-20s, double or more than the average in recent years.

"We are seeing rate increases right now," independent broker Larry Harrison said. "I think there's definitely going to be more increases because of the mandates."

Perhaps what employees will notice most will be the ability to keep children covered by a policy until those children reach age 26 and the ability to secure coverage for children with pre-existing conditions. Both charges are due to take effect Sept. 23. The abolishment of lifetime benefit caps takes effect Jan. 1.

Nevertheless, said Joan McEntyre, a group benefits broker with Orgill/Singer & Associates, "Health care reform seems to be affecting the individual market at the moment. It's just a matter of time before we see the effects on the group market."

The individual market can be something of a leading indicator, she said, because group plan rates are often based on the experience of a particular employer. Those groups that experience a surge in claims pay higher rates than companies with relatively healthy employees, while individual plans reflect broader experience.

Others, however, do not interpret the increases as a warning of what is to come. The Kaiser Family Foundation, a health care think tank, reported in June that renewal rates for individual policies were running about 20 percent higher than last year. However, Kaiser spokesman Rakesh Singh said, the data was collected before the bill passed in March, so it had no effect on the rates.

Kaiser estimates that 14 million people younger than 65 purchase individual policies nationwide.

In a statement, UnitedHealthcare, which owns the Sierra plans in Nevada, said, "We can't predict health insurance figures related to reform or otherwise because premium rate increases are the direct result of underlying health care costs."

However, the Golden Rule subsidiary of UnitedHealthcare has told brokers that it will not write any new policies covering children only, at least until the first of the year.

Independent broker Dwight Mazzone said some of his clients were hit with premiums for family coverage topping $1,000 per month, but were able to reduce it to about $800 by soliciting other quotes.

He is advising his clients to budget for 15 percent to 20 percent premium increases.

"But," he said, "hopefully we can keep under that."

Yet comparison shopping presents companies with problems.

The new law lets companies keep their current policy terms during a transition period to run until 2014. If they choose cheaper coverage, companies would lose that protection. But brokers say this has meant little in practice because any change in the policy, such as the amount of the employee copayment, the size of the company contribution to premiums or the prescription drug policy, voids the grandfather clause.

The wild card that industry experts say still carries numerous questions is the requirement that insurance companies incur at least an 85 percent medical loss ratio. In other words, insurance companies must pay at least $85 in medical claims for every $100 in premiums they take in, an attempt to hold down marketing expenses and profit margins.

Already, Harrison said, several insurance companies have sent notices to agents and brokers saying that they would cut commissions to hold down overhead. Because rules haven't yet specified what expenses will go into the calculation, Harrison said brokers are lobbying to have their commissions excluded. Otherwise, he said, brokers may soon begin to charge companies separately for services that have always been covered by commissions.

Las Vegas Insurance Group broker Dan Heffley believes it is still too early to tell how the new law will change prices. However, he added, "I've been doing this for 20 years and realize that insurance companies are like a balloon filled with air. If you squeeze it in one place, the air just goes somewhere else."

Contact reporter Tim O'Reiley at
toreiley@lvbusinesspress.com or 702-387-5290.