Monthly premiums are a key factor affecting individuals’ choice of health insurance or whether to insure at all. When shopping for insurance, consumers are quoted the best rate given to the healthiest applicants. However, when a consumer applies for coverage the insurer, if it does not reject the application,1 may decide to offer a more expensive premium than the premium quoted. The insurer may increase the premium amount based on the consumer’s weight, sex, smoking status, and pre-existing health conditions. This situation leaves consumers unable to compare health insurance premiums objectively. Instead, they compare best rates among insurers without knowing which insurers will increase their premiums and by how much.
Given that premium ‘rate-ups’ prevent accurate price transparency in health insurance, HealthPocket analyzed 10,817 health plans to determine how widespread this practice is. Nationally 80% of health plans increased premium amounts after the consumer applied. Plans on average increased the premiums for 18% of applicants. Insurer ‘rate up’ practice varied widely state by state. In some states increased premiums were experienced by none of applicants but in most states some portion of the applicants were offered increased premiums. In Pennsylvania, applicants received ‘rate-ups’ at nearly twice the national average. Nearly one in three states had applicant rate-ups above the national average.
National Average: 18%
|Florida||21%||Wisconsin||11%||New Jersey||0%||Connecticut||21%||Louisiana||10%||New York||0%|
When evaluating health insurance companies at the state-level, Blue Cross Blue Shield companies2 rank among the least likely to offer applicants the premiums initially quoted to consumers. Eight of the ten companies that had the highest average rate-ups were part of the Blue Cross Blue Shield Association. Anthem Health Plans of Virginia, part of Anthem Blue Cross Blue Shield, raised the premium for over 2⁄3 of the applicants to their health insurance plans and secured the number one position in the ranking.
|State||Carrier||Rate Up % Avg.|
|VA||Anthem Health Plans of Virginia (Anthem Blue Cross Blue Shield)||68|
|ID||PacificSource Health Plans||65|
|ID||Blue Cross of Idaho Health Service Inc.||57|
|FL||Blue Cross and Blue Shield of Florida||53|
|NV||Rocky Mountain Hospital & Medical Service, Inc. (Anthem Blue Cross Blue Shield)||53|
|PA||UPMC Health Benefits, Inc.||53|
|FL||Health Options, Inc. (Blue Cross and Blue Shield of Florida)||52|
|KY||Anthem Health Plans of KY (Anthem Blue Cross Blue Shield)||50|
|OH||Community Insurance Company (Anthem Blue Cross Blue Shield)||50|
|MO||Healthy Alliance Life Co (Anthem Blue Cross Blue Shield)||49|
The Blue Cross Blue Shield insurers listed above are predominantly for-profit organizations. However, not all of the insurers in the list are for-profit entities. The insurer with second highest rate-up percentage, PacificSource Health Plans in Idaho, is a nonprofit organization.
Each state regulates its own insurance market including premium setting. When examining the eight states where there was no ‘rate-up’ activity, all but Rhode Island3 used some form of community-based premium rating practices.4 States with community rated health insurance require insurers to offer the same premium to all people within a particular region regardless of health status. However, those states with ‘adjusted’ community ratings are allowed to vary insurance rates based on some demographic criteria.
States With 0% Premium Rate-Ups
Due to the Affordable Care Act, individual states will have federal rules governing premium practices in 2014 for the individual and small group health insurance markets. The potential for applicants receiving higher premiums than initially quoted will be reduced but not completely eliminated under the Affordable Care Act. While health status, sex, and pre-existing conditions will no longer be allowed to influence premiums, age and smoking status can still raise rates5 so that older applicants will be offered higher premiums than younger applicants and smokers will be offered higher premiums than non-smokers. However, unlike the present state of affairs, applicants can choose to answer questions about age and smoking status when researching rates and receive an adjusted premium quote rather than receiving a higher premium offer after applying. 6
Premiums are the largest out-of-pocket costs for the average consumer. The Affordable Care Act represents potential premium savings (and improved shopping) inasmuch as increases based on health and sex are prohibited. For healthier individuals, the same legislation may mean more expensive insurance as they subsidize beneficiaries with poorer health. However, the overall effect of the Affordable Care Act on premiums remains unclear. While subsidies, public premium reviews, and limits on Medical Loss Ratios represent downward pressures on premium expenses for consumers,7 expanded benefit requirements and an influx of less healthy beneficiaries represent factors likely to inflate healthcare costs for insurers and contribute to premium increases. With respect to this latter issue, the Affordable Care Act empowers states to subject proposed premium increases of 10% or more to independent expert review and approval.8 The question we cannot answer today is how much will insurers request to increase premiums in 2014 and whether these increases will survive review intact.
Results of the study were based on an analysis of 10,817 health insurance plans for individuals and families under the age of 65. Plans from the Medicare, Medicaid, and employer-based health insurance markets were not included within this study. The data used in this study was obtained from insurance records made public by the Department of Health & Human Services. The data was collected on February 8, 2013. All analysis assumes the accuracy of the underlying government data. While every effort was made towards a comprehensive collection of plans, HealthPocket makes no representation that every plan within the individual insurance market or in an individual state was included in this study. Statistics are not weighted by plan enrollment or application volume. Percentages are rounded according to standard industry practices.
HealthPocket.com is a free website that compares and ranks all health plans available to an individual, family, or employer in a given area, at once. The company uses only objective data from government, non-profit, and private sources that carry no conditions that might restrict the site from serving as an unbiased resource for consumers. The founders of HealthPocket.com spent decades pioneering online access to health insurance information and knew they could offer something different that can positively change how people use healthcare in the United States. You can review the premium rate-up percentage for health plans on their individual details pages at www.HealthPocket.com.
This study was completed by Kev Coleman, Head of Research & Data at HealthPocket.com. Correspondence regarding this study can be directed to Mr. Coleman at firstname.lastname@example.org.
Feedback and questions are welcome but, given the volume of email, personal responses may not be feasible.Google+
1 For a lengthier discussion of the data surrounding declinations, see the previous HealthPocket InfoStat
2 Blue Cross and Blue Shield is an association comprised of 38 independently operated Blue Cross and Blue Shield member health insurance companies. http://www.bcbs.com/about-the-companies/
3 The government records for Rhode Island health insurance plans were limited to those offered by Blue Cross & Blue Shield of Rhode Island. Blue Cross & Blue Shield of Rhode Island is Rhode Island's only insurer that, during open enrollment, offers guaranteed health insurance coverage regardless of health status or preexisting conditions. https://www.bcbsri.com/about-us/news-events/news/open-enrollment-period-blue-cross-blue-shield-rhode-island-direct-pay
4 StateHealthFacts.org. "Individual Market Rate Restrictions (Not Applicable to HIPAA Eligible Individuals), 2012," Kaiser Family Foundation. http://www.statehealthfacts.org/comparetable.jsp?cat=7&ind=354
5 Doran, Phyliss. "Rating and Underwriting Under the New Healthcare Reform Law," Milliman Healthcare Reform Briefing Paper (May 2010), p.3.
6 Additional plan benefits, number of beneficiaries, and region are also factors that will affect premiums under the Affordable Care Act.
7 Technically subsidies represent potential premium savings for qualifying individuals rather than a factor that will reduce the cost of the unsubsidized premium.
8 The Center for Consumer Information & Insurance Oversight "Health Insurance Rate Review: Lowering Costs for American Consumers and Businesses," http://cciio.cms.gov/resources/factsheets/rate_review_fact_sheet.html