CBO: Narrow Networks Lowered Premiums in 2014
3:14 PM, Apr 14, 2014 • By JAY COST
What is driving the lowered estimate? According to the report released by CBO, it has primarily to do with lower-than-expected premiums for exchange policies. So, good news for the Obama administration? Not so fast. Per CBO:
So far, CBO is only projecting a modest increase in premiums for 2015, although it notes, “actual exchange premiums for 2015 may differ from those CBO and JCT have projected because insurers could have different expectations of their costs for that year.” The late surge of enrollees might help keep rates down, but what really matters is not so much the political class’s expectations of what enrollment would look like as of, say, January, but rather what insurance company projections were when they set rates nearly a year ago.
The factors that will influence rates in 2015 include: (a) increasing healthcare costs in general; (b) the grandfathering of “non-compliant” plans by the Obama administration; (c) the difficulty of estimating the 2014 risk pool because of late enrollees and government limits on what health questions insurers could ask of its customers; (d) differences in the actual versus expected ratio of healthy to unhealthy enrollees; (e) state by state variations in the risk pools and costs of providing care; (f) the “Three R’s” -- risk adjustment, reinsurance, and risk corridors -- meant to limit insurance company losses for the first few years of the program; (g) the partial sunsetting of the reinsurance program, which helped keep rates down in 2014.
Insurers will start filing rates with government regulators later this spring.
A footnote on Obamacare hitting its CBO enrollment target. Despite the "surge" of late enrollees late in the period, CBO did not update its previous prediction of total enrollment (which stood at 6 million as of this winter, down from 7 million last year and a high of 9 million after the Supreme Court Ruling). CBO writes:
Recent Blog Posts