TN official: 30% health insurance hike may not be enough

There's a chance some of the health insurance premium increases requested by insurers won't be enough cover losses, a state official testified in Washington, D.C.

Julie Mix McPeak, commissioner of the Tennessee Department of Commerce and Insurance, said raising rates by 30 percent or more might not even be "sufficient" to cover the soaring costs of medical claims.

She said, for example, that the state's largest carrier on the federally run exchange, BlueCross BlueShield of Tennessee, paid more than $1 for every $1 it collected in premiums, meaning it had a medical lost ratio of more than 100 percent.

BCBST had $471 million in claims for people with individual plans in 2014.

McPeak, on Capitol Hill by invitation to talk about rising health insurance premiums, told a subcommittee of the House Ways and Means Committee that substantial rate increases are being driven by medical trends and utilization, or how enrollees use health care services.

The state agency is asking health insurers to provide monthly updates on enrollees and costs because the companies had to write policies and forecast pricing with only a few months of data on the 2015 enrollees.

The lack of data on potential enrollees on the federally run insurance marketplace has largely been a mystery for an industry that relies heavily on claims to predict risk and costs.

The TDCI looks at the impact of rate increases for consumers as well as the impact on insurers, said McPeak, explaining that insurers "need to stay in business" in order to keep promises to members.

The state agency is in the process of reviewing rate requests, which range from 0.4 to 36.3 percent average rate increase.

"We take our rate review process very seriously," said McPeak.

McPeak said that if the U.S. Supreme Court rules against the government in a case on the availability of tax credits, it's possible insurers will have to re-evaluate premiums for 2016.

Mike Kreidler, Washington State insurance commissioner, worries a ruling for the plaintiff could spell a market collapse similar to what Washington state had after it experimented with health insurance reform in the 1990s.

The House committee peppered McPeak along with three other speakers with questions about the impact of the Affordable Care Act on health insurance premiums and whether President Obama's promises have been kept.

The two-hour hearing ran the gamut of what plagues health care. Topics ranged from soaring drug costs to Medicaid expansion as well as narrow networks and regulators' dealings with the U.S. Department of Health and Human Services.

While representatives tried to tie high premium costs directly to the ACA, the speakers were candid about the struggles with the legislation as well as reminders that costs have been on the uptick longer than the ACA has been in place.

Insurance policies are "fundamentally different from the pre-ACA policies," said McPeak.

Kreidler said "the issue of rising premiums has been with us for a long time. … It's been a real problem that's actually looking better right now than before the Affordable Care Act."

The uncertainty that continues to swirl around insurance is largely because guidelines keep changing.

Federal health officials continue to tweak rules that have broad impacts — not to mention the pall cast by the impending decision from the Supreme Court on whether tax credits are available on both federally and state-run exchanges.

Oversight Chairman Rep. Peter Roskam, R-IL, talked about the potential "reset button" that could appear if the Supreme Court rules for the plaintiff, imperiling the future availability of tax credits.

"There is no one who is defending the past," Roskam said.

How are premiums determined?

Many insurance consumers — be it health, car or home — are often unsure about why their premium can rise even if they think they were inexpensive insurees.

Insurance companies determine premiums on a pool of people and the risk associated with that collection. Some members will have higher costs while others have lower costs.

That was evident in the aftermath of the 2010 flood when some policyholders saw higher premiums even though they had no claims. The claims against the bucket of money were higher than expected so premiums had to be adjusted.

Health insurance is similar. Premiums are essentially paid into a pool of money that is used to pay claims. More-than-expected claims tax that pool. Inversely, fewer claims mean money is not being used as expected.