80% of Health Plans Charge Higher Premiums Than Quoted - Healthpocket
InfoStat | 02-19-13

80% of Health Plans Charge Higher Premiums than Quoted

80% of Health Plans increased premium amounts after the consumer applied

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%

National Map. 2 colors: Red = >18% of applicants offered higher premiums, Pale Color = < 18% of applicants offered higher rates

Pennsylvania 32% Iowa 15% South Dakota 9%
Indiana 30% North Carolina 14% Nebraska 8%
Ohio 30% Oklahoma 13% Minnesota 5%
Virginia 28% New Mexico 13% D.C. 4%
Kentucky 28% Arkansas 13% West Virginia 2%
South Carolina 27% Wyoming 12% Alaska 1%
California 26% Maryland 12% Alabama 1%
Nevada 24% Delaware 11% Montana <1%< td>
Idaho 24% New Hampshire 11% Hawaii <1%< td>
Missouri 23% Kansas 11% Maine 0%
Arizona 21% Tennessee 11% Massachusetts 0%
Florida 21% Wisconsin 11% New Jersey 0%
Connecticut 21% Louisiana 10% New York 0%
Michigan 20% North Dakota 10% Oregon 0%
Utah 19% Illinois 10% Rhode Island 0%
Georgia 18% Texas 10% Vermont 0%
Colorado 15% Mississippi 9% Washington 0%



Blue Cross Blue Shield companies were among the least likely to offer applicants the premium they were first quoted 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.

Applicants in Pennsylvania were offered higher premiums at nearly twice the national average 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

  • Maine
  • Massachusetts
  • New Jersey
  • New York
  • Oregon
  • Rhode Island
  • Vermont
  • Washington

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, Offers of higher premiums will be reduced but not eliminated under the Affordable Care Act 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.

METHODOLOGY

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

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.

AUTHOR

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 kevin.coleman@healthpocket.com.

Feedback and questions are welcome but, given the volume of email, personal responses may not be feasible.



Sources:

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://kff.org/other/state-indicator/individual-market-rate-restrictions-not-applicable-to-hipaa-eligible-individuals/
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

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Author

Kev Coleman

Kev Coleman is the Head of Research & Data where he is the author of the HealthPocket InfoStat Reports. Mr. Coleman performs research across the healthcare market, leveraging emerging sources of data from government, nonprofit, and private sectors. Key areas of study for Mr. Coleman include healthcare consumerism and issues associated with the implementation of the Affordable Care Act.

Mr. Coleman lives in New England and holds degrees from Eastern Nazarene College, Yale University, and Duke University. His professional career includes over a decade of executive work in consumer-facing healthcare and financial technology.

HealthPocket is a free information source designed to help consumers find medical coverage. Whether you are looking for Medicare, Medicaid or an individual health insurance plan, we will help you find the right healthcare option and save on your out of pocket healthcare costs. We receive our data from government, non-profit and private sources, and you should confirm key provisions of your coverage with your selected health plan. If you select a plan presented on our site, you will be directed (via a click or a call) to one of our partners who can help you with your application. Our website is not a health insurance agency and not affiliated with and does not represent or endorse any health plan. HealthPocket, Inc. is a wholly owned subsidiary of Health Plan Intermediaries Holdings LLC (NASDAQ: HIIQ)