Prepare to pay more for health coverage - experts explain why

Prepare to pay more for health coverage - experts explain why

NEW ORLEANS, LA (WVUE) - There is no disputing the fact that the federal Affordable Care Act has allowed millions of people, including over 200,000 in Louisiana, to buy health coverage through the private marketplace.

But insurers in Louisiana say what is coming in is no match for what they are spending on healthcare for people who signed up through the federal exchange,

"The Health Care Reform Law changed the business model for health insurers completely, and the Affordable Care Act as it is designed for the individual market has made it very difficult for private insurers to operate profitably, given the many new mandates and the fact that it being administered in such a fashion that it is simply not working," said John Maginnis, vice president of corporate communications and spokesman for Blue Cross and Blue Shield of Louisiana.

"There's no doubt we're going to get some astronomical rate increases," said Wayne Schellhaas, a veteran insurance broker in Metairie with Schellhaas and Associates.

"We're simply dealing with a hand that has been dealt us," said Maginnis.

He said BCBS insures 1.6 million people, and currently 75,000 are in individual Affordable Care Act policies.

"We have struggled in that individual market because of the flaws in the way that the Act is administered and because there haven't been proper incentives to get the young and healthy involved," he said. "The special enrollment period has not been adequately overseen and policed, we're seeing a number of people coming in before and after open enrollment periods with special life-changing events and that sort of thing, they're coming in, they're getting expensive procedures and then dropping coverage shortly after that, so that's had an adverse effect."

Walter Lane is an expert on health care economics at the University of New Orleans.

"It used to be that if you got over $200,000 worth of expenses, the insurance companies could cut you off," Lane said. "Well, they can't do that anymore.  They can't prevent pre-existing conditions exclusions, so all of those things raise the cost of insurance, and so guess what? That's going to cause those premiums to go up."

"We project that we will have lost over $200 million in those three years," Maginnis said.

Blue Cross and Blue Shield of Louisiana is asking for a sizeable rate hike for the new coverage year for individual plans.

"We have experienced much higher losses than we had anticipated, necessitating us going back to the Department of Insurance and filing for rate increases in the individual market of up to an additional 40 percent," Maginnis said.

Louisiana Insurance Commissioner Jim Donelon is quick to add that in general, rate hikes being sought are in the high 20 percent range for Louisiana.

"The overall rate increase in the individual market, and that's for the few companies still writing, Blue Cross being the major, but also Vantage Health Care and a few smaller than that providers is 27 percent - very, very significant, but frankly out of line with what's happening in other states like Texas, seven to 60 percent, Georgia nine to 65, Iowa five to 45, Alabama 39 [percent] in the individual market, and that's after 13 to 14 percent rate increases this year and last," said Donelon.

"There's going to be less pressure to keep rates low because of the exit of some of the carriers from the state of Louisiana. As far as I can tell, it always has been the consumer's best protection, competition, and we're going to have less of it in 2017,"  said Schellhaas.

Even people with job-provided health coverage can expect to pay more.

"On the small group side the average increase is nine percent and that's after back to back years with 3 to 6 percent," said Commissioner Donelon.

For the federal marketplace and state-run exchanges, a mass exodus is not expected due to higher rates because many people get government subsidies.

"If an individual's income has not changed, the subsidy amount won't change, as well, and so they'll see no real, material change in the premiums that they're paying if they get subsidies," said Maginnis.

"If they lost that subsidy, certainly it's a huge hit to them," said Donelon.

In terms of the government, higher rates would mean cost of providing subsidies would go up.

"The cost of the program to the government is going to be going up and there's political cost to that," said Lane.

Those expected to feel the pain the most are middle class people who buy insurance on their own without government help.

"The cost of the program to the government is going to be going up, and there's political cost to that," said Lane.

Jeff Drozda, Chief Executive Officer of the Louisiana Association of Health Plans said the individual marketplace is in a "precarious place" right now as some big name insurers like Aetna, United and Humana have significantly scaled back their involvement in the federal insurance marketplace resulting in fewer choices for consumers. He thinks Congress may have to eventually get involved to keep the marketplace viable.

But Lane doubts health care reform will collapse under its own weight because so many people now have coverage they did not have before, and the law mandates certain benefits for the insured.

Up to 375,000 additional residents of the state are expected to get coverage through Medicaid expansion which began in July. Their coverage will be paid for by the government.

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