Plans with greatest market share will have higher premium increases for 2015

Initial data surrounding proposed rate increases for 2015 is starting to trickle in and evidence suggests that the size of the increase often relates to the percentage of market share a plan has achieved.

According to new analysis from Avalere Health, which examined proposed rate increases for 2015 exchange plans in Washington state, the carriers who had the smallest share of the market in 2014 were also the carriers planning the smallest increases-or in some cases decreases to their rates. According to the analysis, Molina Healthcare of Washington plans to decrease their rates by almost 7% in 2015. The carrier accounted for just 1% of the market share in 2014.

"Smaller companies, such as those in the state of Washington, may be able to limit pools and be more selective," says Joel Splan, chief executive officer of Galen Healthcare Solutions & Pinpoint Health. "They will have lower risk and be able to afford lower premiums, or in this case, even reduced premiums...until they become so successful that they become big companies, at which point, of course, they will raise their rates."

Bigger insurance companies don't have that flexibility since they are often forced under the Affordable Care Act (ACA) to take on procedures and patients they may not have accepted before, Splan says. 

"For these companies, the sky is always falling," he says. "So, with the increased risk, they have increased premiums so the sky doesn't hit them too hard."

In Washington, for example, Premera Blue Cross which earned 46% of the market share in 2014 is planning a rate increase of  8.1% in 2015. Two other carriers, Centene (Coordinated Care Corp.) and Group Health Cooperative, which earned 17% and 16% of the market share, respectively, are both planning more than an 11% increase.

While Washington state was the first state to release information on both carrier enrollment in 2014 and subsequent proposed rate filings for 2015, Aetna Inc's Chief Executive Officer, Mark Bertolini, recently said the premium rates its submitting for Obamacare insurance plans for 2015 generally reflect an increase somewhere in the low double digits compared to what it offered in 2014. He says that the increases will not exceed 20% in most cases.

Aetna, one of the largest carriers on the exchanges, has said previously that it lost money providing plans on the exchange but hopes to grab a larger customer base by expanding into new markets.

"This is an exciting time in the evolution of healthcare and the implications of change have yet to be played out," Splan says.

Many insurance companies and medical institutions predicted catastrophe within five years of passing the ACA, but that time has come and gone, he says. While some still believe disaster is just a few years away, Splan believes the situation isn't dire.

"We can’t predict what our healthcare system will look like in the next few years, but new payment models are inevitable-pay for service is a dead man walking-and ultimately, I think all this change will be better for the aggregate and put healthcare in line with the rest of the economy," he says.