2016 Health Insurance Industry Highlights

Posted: January 17, 2017

Looking back, 2016 was quite a year for the health insurance industry – and all those involved. Let’s take a look at some of the year’s highlights (or lowlights).

Rising Exchange Premiums

Insurers participating in the Affordable Care Act (ACA) national exchange increased premiums in 2016 (for 2017) by 25 percent. That was the biggest increase since ACA coverage first went on sale in 2013 (for 2014). The average monthly premium for benchmark coverage – the second-lowest ACA Silver Tier plan – increased to $302 from $242 in the prior year, according to the U.S. Department of Health & Human Services.

In major cities across the country, a Kaiser Family Foundation analysis of premiums found they vary significantly. The second-lowest Silver Tier premium for a 40-year-old non-smoker in 2017 ranges from $229 in Louisville and Cleveland to $904 in Anchorage before tax credits. While premiums did increase in many locations for the new year, some cities in the foundation’s analysis actually saw declines in the cost for the second lowest-cost Silver Tier plan – one percent lower in Boston and four percent lower in Indianapolis. The cities with the highest increases were Phoenix – up 145 percent – and Birmingham, which was up 71 percent.

In California, rates rose 13 percent on the Covered California marketplace – up dramatically from the previous two years (when rates rose four and 4.2 percent, respectively). Blue Shield of California premiums jumped an average of more than 19 percent and Anthem Blue Cross rates rose by more than 16 percent. The premium increase impact was, of course, muted for those who receive an ACA subsidy.

Changes in Insurer Participation

Part of the reason for higher premiums, at least in some areas of the country, is a change in the pool of participating insurers. In April 2016, UnitedHealth Group CEO Stephen J. Hemsley said his company would scale back its ACA participation for 2017. He cited more than $1 billion in losses in 2015 and 2016. Aetna and Humana – who announced plans in 2015 to merge – made announcements of their own soon after on their planned withdrawals. Other regional players followed. The result is more counties with a single marketplace insurer for 2017 – 31 percent of counties as compared to just seven percent during the prior ACA open enrollment period.

Increasing Costs, Changing Coverage

Escalating out-of-pocket costs for individuals and employer-sponsored plans were an issue in 2016 (and likely will continue to be). Kaiser Family Foundation data shows slower premium growth for employer plans as business owners and executives have shifted more workers into high-deductible health plans (HDHPs).

Increasingly, employers are also moving to private health insurance exchanges. Growth was up by more than one-third (35 percent) in 2016, as compared to the prior year.

Provider Directory Accuracy

California and other states – as well as the Centers for Medicare and Medicaid Services (CMS) – are cracking down on inaccurate provider directories. California enacted S.B. 137 last year, which requires health plans to keep provider directories online and up to date. In fact, it mandates plans and insurers update their online directories weekly and printed directories at least quarterly.

CMS enacted a directory accuracy measure of its own in 2015 that took effect last year. Qualified Health Plans (QHPs) and dental plans with directories that do not adhere to the new CMS rules face fines of up to $100 per day for each individual adversely affected; Medicare Advantage plans face fines of up to $25,000 per day for affected Medicare Advantage beneficiaries, according to Kaiser Health News.

Mergers Delayed

We are still awaiting word (as of 1/17/17) on whether the proposed merger of Aetna and Humana, and the separately proposed merger of Anthem and Cigna, will be allowed to close. After the Justice Department announced its opposition to the two mergers, all four insurers pushed back their deadlines for completion of their proposed deals. The Aetna/Humana deal has an extended deadline of mid-February 2017, after wrapping up their trial in December 2016; no word yet on a verdict.

The second federal trial – which affects the planned Anthem and Cigna deal – began in November 2016 and ended its first phase in December 2016. The case resumed in January 2017, but a forecast on a verdict is hard to come by.

Reporting suggests the government put forward a strong case but the proposed consolidations could result in too much market concentration, adversely affecting consumers. Time will tell.

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