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Rate increases proposed by insurers for 2016

GRAND FORKS -- Some of the biggest insurance companies in North Dakota and Minnesota have proposed double-digit rate increases for premiums on plans purchased outside of the workplace, a trend one official said has to do with higher health care c...

GRAND FORKS -- Some of the biggest insurance companies in North Dakota and Minnesota have proposed double-digit rate increases for premiums on plans purchased outside of the workplace, a trend one official said has to do with higher health care costs.

Blue Cross Blue Shield, the largest health insurer in North Dakota, proposed an average 18.4 percent increase on its individual insurance plans starting in 2016. Its counterpart in Minnesota proposed rate increases of at least 50 percent on several products.

The Blues isn't alone in proposing higher rates. HealthPartners Insurance Co. in Minnesota is proposing a 23.7 percent increase, and Medica Health Plans is asking for a 16.5 percent increase in North Dakota.

Yet experts pointed out the rates submitted last month only represent the biggest increases and not plans that are expected to keep premiums the same or lower. They also said it indicates insurance companies are adjusting to a new health care environment under the Affordable Care Act.

"This is a new market to both the consumers and the insurance companies, and as in any new market, such fluctuations are expected," said Pinar Karaca-Mandic, a health economist and associate professor at the University of Minnesota School of Public Health.

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Federal law requires rate increase requests larger than 10 percent to be submitted for review ahead of time. The requests and justifications for the increases were posted on the Center for Medicare and Medicaid Services website in the past few weeks.

Regulators may push back against some rate increases, one expert said. Blue Cross Blue Shield North Dakota requested a 22.2 percent increase for 2015, but it was finalized at 13.2 percent.

The 18.4 percent increase BCBS in North Dakota is requesting for 2016 only affects individual plans and not employer groups. The increase would affect about 30,000 of its 500,000 members in the state, said Brad Bartle, the company's chief actuary.

Adam Hamm, the North Dakota Insurance Commissioner, said his department will examine rate requests "piece by piece" to see if the increase is justified. He said it's common for the final approved rate to be lower than the original requested increase.

Trending upward

Bartle said rising health care costs are the biggest reason for the proposed premium increase. BCBS expects its members' claims to be 7 percent higher in 2016, he said.

Larry Levitt, senior vice president at the Kaiser Family Foundation, said in a series of tweets last month "health care costs in general seem to be trending upwards, so we should expect bigger premium increases in 2016."

The health conditions of newly insured people can may be driving up costs. The first years of the health insurance exchanges brought some uncertainty about who would buy new health plans and their health care costs, Karaca-Mandic said.

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"It could be that the enrollees ended up being older and sicker than they expected," she said. "It is highly possible that there was a pent-up demand for health services among this population because of the many prior years of being uninsured and staying without health care."

The high cost of new specialty prescription drugs like treatment for Hepatitis C is also a factor, according to the Minnesota Council of Health Plans.

Meanwhile, the phase-out of federal financial support is playing into the Blues' rate request, Bartle said. The support was meant to help smooth the transition into the new health care law.

Bartle added that the uncertainty surrounding health care reform is making it more difficult to set premium rates.

"The ACA really changed a lot of the landscape in the health insurance marketplace," he said. It's a good thing that consumers have options, but "that means the insurance companies' enrollment is a little less stable than it was five years ago and it's harder to predict what the costs will be in 2016."

Working itself out

Experts said the swings in health insurance rates should moderate over time.

Karaca-Mandic said the "pent-up demand" for care will settle down, while Levitt said "insurers are basing 2016 premiums on real claims experience for the first time," so "some big swings are to be expected." He pointed out that people buying health care on ACA marketplaces are receiving subsidies that could cushion premium increases.

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Consumer education could be a way to help control costs going forward, Karaca-Mandic said.

"If it is true that the new enrollees had higher rates of emergency department use, part of that could be because they were uninsured before, and emergency room was their primary source of care," she wrote in an email. "Over time, the hope is for the new enrollees to have more stable usual source of care other than emergency room, and to emphasize preventive care that can prevent some avoidable emergency room visits and hospitalizations."

Brad Gibbens, the deputy director for the Center for Rural Health at the University of North Dakota, said despite the noticeable increases proposed in the past couple of weeks, some are planning to reduce premium rates.

"We're seeing an increase ... in the number of health plans that are available to people through the marketplace," he said. "That competition is having an impact on rates. That's why in some places on some of the plans you'll see that there's actually an decrease in premiums, and in other places there's going to be an increase."

Jim Schowalter, the president and CEO of the Minnesota Council of Health Plans, said big changes like the ones that came with the new health care law "tend to take a little while to work themselves out."

"Each year, we're going to get more information and understanding about who's going to be seeking insurance, what they're long-term health care costs are, and that will take some years to settle out," he said.

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