Not Much “Shock” in CareFirst’s Proposed 2014 Maryland Health Insurance Rates

April 25, 2013 at 4:39 pm

Health insurers are starting to submit, for state review, their premium rates for the coverage they will offer in the individual and small group markets next year, when the major components of health reform take effect.  The latest batch comes from Maryland, where the largest insurer, CareFirst, has asked the state for a 25 percent average rate increase for its 2014 individual-market plans compared to its 2013 products.  Health reform critics may cite this as the latest evidence of so-called “rate shock,” but a closer look at the CareFirst proposal shows that isn’t the case.

  • The 25 percent average increase that has received so much attention is an average across all of the plans that CareFirst and its affiliates will offer.  Notably, CareFirst is assuming that 80 percent of the parent company’s 2014 expected enrollment will be in plans offered by BlueChoice, for which CareFirst is predicting an average 12 percent annualized rate increase compared to 2013.  That’s not insignificant, but it’s in the range of the increases people in the individual market have typically seen before health reform.
  • Sixty percent of CareFirst’s 120,000 members in Maryland’s individual insurance market are enrolled in “grandfathered” plans that don’t have to comply with some of health reform’s major changes yet and so aren’t affected by the requested increase.
  • Consumers care most about what they actually pay for coverage, and these filings don’t show that.  The premiums that people will pay will be based on additional factors such as age and geography.  And as we have written previously, a large share of the people in the individual market, including the young and healthy people that insurers want to attract, will get substantial help paying premiums through the tax credits that health reform will make available.
  • Catastrophic plans will be available for people under age 30 and certain other groups.  So the relatively small share of young and healthy people who won’t be eligible for subsidies and are willing to assume the risk of much higher out-of-pocket costs have a lower-premium option.  The BlueChoice Young Adult plan (with a $6,350 annual deductible) has an average per-member, monthly rate (according to the preliminary filings) that is roughly half the rate of a mid-range plan with a $2,000 deductible that is open to people of all ages.

Maryland’s Insurance Administration must still review CareFirst’s request, determine whether the proposed rates are based on reasonable assumptions, and decide whether to approve the proposed rates, with final prices becoming available to consumers by this fall.

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More About Sarah Lueck

Sarah Lueck

Lueck joined the Center in November 2008 as a Senior Policy Analyst.

Full bio | Blog Archive | Research archive at CBPP.org

6 Comments Add Yours ↓

Comments are listed in reverse chronological order.

  1. Grumpster #
    1

    12% isn’t much? Ok…how about we just have all federal employees get a 12% raise and see if that doesn’t make life interesting? How about YOU take a 12% pay cut? 12% is a lot…and we all know it. This is the simple game of first asking for an asinine amount like 25% so that 12% will seem reasonable when they back down to that. Get real.

  2. 2

    I think that individual subscribers to CareFirst plans in Maryland will experience sticker shock, but it will be a delayed reaction….

    I am currently enrolled with CareFirst via Maryland’s “grandfathered” MHIP state plan. I have spent hours researching my options in the new Maryland Health Exchange.

    Those MHIP participants who are paying subsidized premiums will lose their subsidies and have to switch to the new plans at the turn of the year. I am paying full price so I can delay the change, but only until the end of the MHIP fiscal year 30 June 2014.

    I have found a new “BlueChoice” plan very similar to my current MHIP plan, but the differences are important. My monthly premium would be seductively lower and save me about $1000 per year. But my deductibles per family will go up by more than $1000 per year. Those consumers who don’t know how to evaluate the difference between paying a premium or paying a deductible are in for a nasty surprise.

    I also find that the “Summary of Benefits” given for the plans on the Maryland Health Connection do not answer some coverage questions, and I have been unable to get any answers from insurers. For example, federal law requires the new individual plans to cover dental care for children. Some plans also say that orthodontia is “covered”. I find that hard to believe, and I have not been able to get any answers as to how much is covered. I am hoping that when people start using the new plans in January more answers will emerge.

  3. George Burns #
    3

    Mark Meade. They did not miss anything, the article(s) are about a particular event not about the broad topic. That a segment of the population will ace rate shock is irrelevant to this article. A tornado in OK is not a tornado in MA. It would be foolish to show houses in Boston saying that the tornado missed.

    Webmaster: A Share link for LinkedIn would be useful.

  4. Mark Meade #
    4

    The stories about rates astronomic shock are for the most part wrong but the Ms.Lueck others miss several important points in their analysis. First a segment of the population will face rate shock and for them it will be chilling. The fact that subsidies will somewhat remediate the cost increase is deceiving and creates a false sense of safety. If you draw back and look at the outcome of this disparity between risk and its associated cost you will be a bigger problem. If increase costs for the young drives them to drop coverage, buy less coverage or get subsidized coverage this all impacts the solvency of the whole system. First the country is broke and more subsidies will require others to pay higher taxes, premiums or the nation to incur more debt. Most likely all of the above. This will dampen an already limping economy in what, “Recovery Summer Five.” Next the whole rate balancing game will be off and the additional money expected from the young will not be there driving a rate spiral often referred to as a “Death Spiral” as the healthier people reduce coverage and or drop out pushing rates higher and creating more erosion.

  5. Thomas Jenkins #
    5

    Just a brief comment and question. First and foremost, my spouse and i are both on a Medicare Advantage Plan that is subsidized with health insurance from an employer. That being said, what kind of impact will these increase have on the average medicare patient or on current medicare patients with chronic conditions like epilepsy, heart disease, etc?

    • CBPP #
      6

      Mr. Jenkins – Thanks for your question. Our blog post on CareFirst’s proposed insurance rates in Maryland related to the individual insurance market, where people buy coverage on their own, usually because they don’t have health benefits from an employer or a program such as Medicare. So Medicare beneficiaries shouldn’t worry about that.



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