The States Where Obamacare Could Still Go Badly

Several states are in danger of seeing big premium increases.

National Journal
Sam Baker
May 12, 2014, 1 a.m.

Des­pite Obama­care’s strong na­tion­al en­roll­ment num­bers, sev­er­al states are at risk for big premi­um hikes.

Each state is its own in­sur­ance mar­ket, and they had wildly dif­fer­ent ex­per­i­ences dur­ing Obama­care’s first open-en­roll­ment win­dow. So al­though na­tion­wide stat­ist­ics are im­port­ant for judging the law’s polit­ic­al suc­cess, the sub­stant­ive tests for the law’s fu­ture mostly lie with the states — and some of them aren’t look­ing so hot.

Pre­dict­ing premi­um in­creases is an in­ex­act sci­ence to say the least, but health care ex­perts see a troub­ling num­ber of red flags in cer­tain states. Per­haps the most vul­ner­able is West Vir­gin­ia — the home state of Sylvia Math­ews Bur­well, who’s await­ing con­firm­a­tion as the next Health and Hu­man Ser­vices sec­ret­ary.

“West Vir­gin­ia sticks out as really wor­ri­some,” said Car­oline Pear­son, vice pres­id­ent at the con­sult­ing firm Avalere Health. “Their ex­change is not hav­ing great luck.”

Premi­ums will go up, on av­er­age, across the board — premi­ums go up every year. But a range of factors could drive high­er-than-av­er­age in­creases in cer­tain places. States that fell short of their over­all en­roll­ment goals, and where the people who did en­roll are mostly older and sick­er, are more at risk for large premi­um hikes. So are states that don’t have much com­pet­i­tion among in­surers.

“If you lose on all of those, then you’re really look­ing bad,” Pear­son said.

And West Vir­gin­ia lost on all three fronts this year. It only got about 60 per­cent of the way to its total en­roll­ment tar­get, Pear­son said. And it has the worst mix of young adults in the coun­try — just 19 per­cent of people who picked a plan through the state’s ex­change were young adults, who are pre­sumed to be health­i­er and thus help keep premi­ums in check.

Com­plet­ing the tri­fecta, there’s only one in­sur­ance car­ri­er — Blue Cross Blue Shield — in West Vir­gin­ia’s ex­change.

Hawaii is an­oth­er con­sensus pick, and some ex­perts say the state might nev­er be able to sup­port its Obama­care ex­change. Hawaii was near the bot­tom for total en­roll­ment, sign­ing up just 15 per­cent of its eli­gible pop­u­la­tion, and had the second-worst mix of young adults. The state’s ex­change also suf­fers from the fact that Hawaii had a low un­in­sur­ance rate to be­gin with — mean­ing there’s a smal­ler pool of po­ten­tial cus­tom­ers there, which makes the state less at­tract­ive to in­surers.

“Hawaii looks prob­lem­at­ic. They could have vi­ab­il­ity prob­lems,” said Larry Levitt, seni­or vice pres­id­ent for spe­cial ini­ti­at­ives at the Kais­er Fam­ily Found­a­tion.

Levitt ad­ded an­oth­er factor that could drive up some states’ premi­ums: wheth­er they went along with Pres­id­ent Obama’s de­cision to let in­surers un-can­cel cer­tain plans that don’t com­ply with the Af­ford­able Care Act.

The con­sumers who are most likely to keep their once-can­celed plans are people who got a good deal un­der the pre-Obama­care sys­tem — gen­er­ally young­er, health­i­er people who en­joyed low premi­ums and who make too much money to qual­i­fy for the health care law’s sub­sidies. Let­ting them re­new their non­com­pli­ant plans keeps a healthy pop­u­la­tion out of the ex­changes.

“That’s the one I hear most of­ten from in­surers, and I think that’s right. It cer­tainly is a factor,” Levitt said.

Ohio and Ari­zona, both of which al­lowed plan ex­ten­sions, are on Levitt’s list of states to watch for big premi­um hikes. He and Pear­son men­tioned Iowa, which al­lowed a two-year ex­ten­sion for can­celed plans and was the second-worst state at en­rolling its eli­gible pop­u­la­tion.

Health care ana­lysts are also keep­ing an eye on premi­ums in Mary­land, Mis­sis­sippi, New Mex­ico, and South Dakota, where of­fi­cials had to beg and plead just to get one car­ri­er in­to the state’s private mar­ket.

It’s im­possible, though, to say with any cer­tainty wheth­er a par­tic­u­lar state will see an above-av­er­age price in­crease next year.

Premi­ums re­flect med­ic­al spend­ing, not just the demo­graph­ics of state mar­kets, and quick­en­ing growth in health costs — which many ana­lysts are ex­pect­ing — could lead to double-di­git premi­um hikes ir­re­spect­ive of Obama­care en­roll­ment.

Some states’ risk factors could also change. After see­ing the res­ults of a stronger-than-ex­pec­ted first year, in­surers that ini­tially sat out the ex­changes are think­ing about ex­pand­ing their pres­ence. Ana­lysts ex­pect United­Health­care — a massive in­surer with hardly any ex­change pres­ence in 2014 — to enter sev­er­al new state mar­kets next year.

More com­pet­i­tion could be­ne­fit sev­er­al states that are at risk for big premi­um hikes primar­ily be­cause they only have one or two in­surers now. There are ru­mors of car­ri­ers en­ter­ing the mar­ket­places in Mis­sis­sippi, Iowa, and South Dakota, in par­tic­u­lar.

“Those are ma­jor play­ers with big mar­ket­ing dol­lars, and if they de­cide to price low, that could jumble the mar­ket quite a bit,” Levitt said.

And no one ex­cept in­sur­ance com­pan­ies knows ex­actly what in­surers pre­dicted for this year. Wheth­er a par­tic­u­lar car­ri­er needs to raise its rates de­pends on how well en­roll­ment matched that com­pany’s own ex­pect­a­tions — not on wheth­er it lived up to stand­ards set by the White House or the me­dia.

So a com­pany that set ag­gress­ively low premi­ums for 2014 might need to raise its premi­ums a lot if it ended up saddled with more claims than ex­pec­ted.

By con­trast, a car­ri­er that set ag­gress­ively low rates as a tool to cap­ture more cus­tom­ers, and suc­ceeded, might not need to pur­sue big hikes next year — es­pe­cially if it’s in a com­pet­it­ive mar­ket.

“If you’ve got a lot of car­ri­ers, you can af­ford to lose a few,” Pear­son said.

We also don’t know how many people in each state signed up dir­ectly with an in­sur­ance com­pany, rather than go­ing through their states’ ex­changes.

Dir­ect en­roll­ments — which num­ber around 5 mil­lion na­tion­wide — are part of the same risk pool as ex­change cus­tom­ers, but aren’t in­cluded in fed­er­al-en­roll­ment data. If off-ex­change en­rollees are health­i­er than ex­change cus­tom­ers in a par­tic­u­lar state, that state’s over­all risk pool would be bet­ter than of­fi­cial data make it look.

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