My Musings on Silver Plan Pricing Stratergies

[Post Quartermaster]

In all seriousness, do you really see the single 20-something crowd who earns $20k to $30k actually coming out in mass and purchasing insurance? Because I don't.

On their own, I do not.


With help from an Agent, perhaps - hey "I'm here to sell the tax penalty" .....between the penalty (which I do know is much less than cost of coverage - yes, I understand that) and the voting tendancies (D) of most young folks - I think it could be a decent market......




And aside from whether we "think 21 y/o's will buy", I think we can all agree that they are who the insurers NEED in the risk pool to avoid detonation. All things considered (Reinsurance & risk pool) - insurers still NEED the under 30 demographic.


I'm pretty sure there are no actuaries sitting out there thinking "oh, we won't get the under 30 crowd and it wont matter because of the temporary reinsurance pool"........




And there is also this:


More than 70% of 18- to 30-year-olds responding to a Kaiser Family Foundation poll said health coverage is "very important," and a similar percentage said health insurance is worth the cost. Forty percent of uninsured respondents of all ages cited the price of insurance as the main reason for not buying it. About 50% of uninsured respondents said they had not heard of the Affordable Care Act's marketplaces, and another third had heard only a little.

 

[somarco]

looking beyond cost and it is usally at the network. And if they a are looking at the network it's a high probability that they are higher risk people. As you know you only need a small percentage of high/bad risk in the pool to make it go south quickly.

Exchange buyers, especially the younger ones, will not be that sophisticated.

When I gravitated away from large group to small group and IFP I discovered that most buyers not only were uninformed but they were content to stay that way.

Exchange plans will have very limited networks, even on the richer plans. Even if the buyer looks to see if "their doc" is in network that is probably as far as it will go.

Yes, a few will weigh benefits, especially if they have health issues, but if they can't afford the gold and platinum plans, even with my subsidy money leaving my pocket and going to theirs, they won't buy the richer plans.

And yes, it only takes a few turds to foul the pool.

As you pointed out, carriers with the richer benefit/higher priced plans will eventually bow out of the risk pool and those plans will be retired by the carrier and go into a death spiral.

The concern over risk from some in this thread (not all) seems way overstated - you are all aware that "risk adjustment" across carriers is part of the new world, yes? Plus reinsurance protection, and risk corridors... Carriers with a good understanding of the 3 Rs recognize exchange business as a huge opportunity.

Maybe, maybe not.

As I recall, the risk reapportionment refund will be pro-rated according to carrier market share. It does not operate like a typical quota share reinsurance arrangement.

The reinsurance is run by the feds which is another potential fly in the ointment.

All the reinsurance contracts I was aware of when I was in that game didn't pay until usually 90 days after the end of the contract year. If this works the same the carriers have to float their losses until April, 2015 at the earliest before they get a payout and even then it may not be enough to offset losses.

I think this thing will blow up before then and there is no guarantee the govt knows how to administer a reinsurance arrangement, nor to they really care if it is funded or not.

There is considerable risk to the carriers. The folks that believe this is a risk free (or at least highly minimized and protected) game are fooling themselves.

If DC really cared about preserving the carriers they never would have instituted MLR.

PCIP blew up because the govt got tired of absorbing the losses, and they (govt) were taking the brunt of the loss.

Obamacare and the exchanges won't be far behind.

 

[Post Quartermaster]

The concern over risk from some in this thread (not all) seems way overstated - you are all aware that "risk adjustment" across carriers is part of the new world, yes? Plus reinsurance protection, and risk corridors... Carriers with a good understanding of the 3 Rs recognize exchange business as a huge opportunity.

I obviously agree - and there is a component to this discussion I have alluded to, based on rumors we have heard that causes me great concern.....


"Hypothetically speaking" - imagine a local carrier with overwhelming market share, conservative actuaries (working with a mature current block), and a stellar network that is their traditional selling point.....


Now, suppose that local carrier priced their plans 40-50% above what the estimated premiums on the KFF calculator are.....mind you, those #'s look very low, but they are based on CBO estimates......


Let's say that a big national carrier comes in priced at 10-20% above those CBO estimated numbers (damn the torpedos - we have the 3R's)


Local carrier is out trying to sell the network, which, as Leevena alluded to, will attract high risk....and discourage young/healthy.....






Suddenly, someone local has a very big problem on their hands............

 

[houcoogster]

Agree with everything else except this last part. No idea where you are getting this from.

The concern over risk from some in this thread (not all) seems way overstated - you are all aware that "risk adjustment" across carriers is part of the new world, yes? Plus reinsurance protection, and risk corridors... Carriers with a good understanding of the 3 Rs recognize exchange business as a huge opportunity.

If this is true why isn't Aetna, UHC and Cigna in the Cali exchange?

 

[Post Quartermaster]

If this is true why isn't Aetna, UHC and Cigna in the Cali exchange?

My guess is twofold - 1st CA has alot of competition from other carriers - Kaiser, Blueshield, & Anthem, the top 3 carriers control 70% of the market, from what I see, roughly.


Seems to me a state a decent population size, with a single carrier controlling the majority of the business would be a much riper target, this first year. Florida, perhaps?


Not to mention, no single carrier has the resources to file in every state for 2014 - maybe down the road, perhaps.....

 

[Yagents]

I think it's related to the active purchaser state exchange model:


California, for example, rejected several of the insurance companies that wanted to sell policies in the state’s exchange, and state officials credited that power with lower-than-expected premiums for policies sold through the exchanges.

Read more: Sebelius: HHS negotiating with insurers on premiums - The Hill's Healthwatch
Follow us: @thehill on Twitter | TheHill on Facebook
​

 

[Quotebroker]

They will use it, with a vengeance. If we are forcing them to buy it, they will use it.

All you can eat syndrome. If they're getting the cost sharing subsidies and the premium subsidies, then I can see usage spiking. "I have to have this, now I can finally go to the doctor every time I sprain an ankle or have a cold"

Now that might taper out when the tiny network only has doctors with big waiting rooms and long wait times

 

[Post Quartermaster]

I think it's related to the active purchaser state exchange model:


California, for example, rejected several of the insurance companies that wanted to sell policies in the state’s exchange, and state officials credited that power with lower-than-expected premiums for policies sold through the exchanges.

Read more: Sebelius: HHS negotiating with insurers on premiums - The Hill's Healthwatch
Follow us: @thehill on Twitter | TheHill on Facebook
​

+1

Very good point.

 

[Ann H]

I want to commend every poster on this thread for the fine job they have done. I'm impressed with all of the views that have been expressed thus far. Quartermaster, you really thought this through before you posted the original thread, and I see your insight into the plight of the 3rd lowest plan. ActuaryGuy, it's nice to see you back here posting again. Somarco and Leevena, you both are old masters at this, and I always read your posts for insight, because I continually learn from you. Yagents - I'm tired of giving you thumbs up on every post you write less a visitor might think you are the best in AZ (inside joke)! This thread has some really fine insight.

I think the carriers with any benefits higher than the 3rd lowest Silver plan will suffer adverse selection, especially if it comes with an expanded network. Really, the lowest Bronze or Catastrophic will probably win the war for the healthiest enrollees. Clearly, the young & healthy will choose lower premium plans. But also those with cost-sharing reductions who must choose the Silver plan will be high utilizers. So, it's a race to the bottom. And, considering the benefit reductions that happen to all entitlement programs, that bottom will probably keep falling.

 

[somarco]

Thank you, Ann, for your kind words. Sometimes I feel like I am the lone wolf in this Obamacare mess. Lee and I share a common background in many ways and paths have almost crossed.

He stayed in the self funded market while I moved on and I trust his judgement on many of these areas although we don't always agree. Those who discount his insight are missing the boat. His company has some very successful products and are on the leading edge of what is yet to come.

Obamacare is a new arena for most of the carriers but you don't have to look too far to see what is in store if this monster survives. It will not be pretty and some carriers are going to lose their butts if they are not careful, lucky, or both.