Increases Ahead

Health Insurance In 2018 Will Be Expensive And Confusing

By PAUL NATINSKY
Uncertainty in Washington makes the long-term outlook for affordable health insurance murky, but it’s clear that in the short term, buying health insurance on the open market will be costly.

Premiums for people buying insurance directly from health insurers are expected to skyrocket for 2018, after an average 17.2 percent increase for Michigan plans in 2017. To be clear, the huge rate increases will only affect those who buy their own insurance, “individual” plans. People insured through their employers in “group” insurance plans are somewhat insulated from the volatile market.

We spoke to two Metro Detroit insurance agents who have been in the business for decades. They both reported that in addition to rising premiums, individual plan deductibles have gone through the roof, leaving those who buy their own health insurance with budget-busting expenses.

Fourteen-year insurance industry veteran Paul Jaboro said one of his clients, a 59-year-old woman with diabetes earning $60,000 per year last year faced a $1,000-per-month premium bill and a deductible of $3,500. A year later, her premium had increased to $1,100 per month and her deductible to $5,100. “That’s $17,000 for one person who is 60 years old,” said Jaboro. He said his client wonders how she will be able to pay off her house and retire.

Under the Affordable Care Act (Obamacare), insurance companies were required to offer a comprehensive package of health insurance benefits that included prescription drug coverage, behavioral health coverage and maternity coverage, among other provisions. The ACA also required people to buy insurance or face a fine and provided subsidies for both health insurance premiums and health care services to people with low incomes.

That assistance came in two varieties. The first is help paying premiums. The second is direct help paying for health care services. Help with paying for services amounted to a $7 billion bill for the federal government last year and hundreds of millions for Michigan. It is unclear if President Trump’s administration will authorize payment of that money for 2018. The result is that insurers have applied for rates that are high and higher, depending upon whether the funds are approved.

Blue Cross Blue Shield of Michigan, along with other insurers, filed two different sets of rates with the Michigan Department of Insurance and Financial Services. One rate was filed anticipating the payments will be approved and a second, higher rate, in case they are not. The fate of the so-called Cost Sharing Reductions—that pool of $7 billion—is still up in the air, and insurers will not establish rates for 2018 until August, said Rick Notter, director of Individual Business at Blue Cross Blue Shield of Michigan.

Rocky Husaynu, who has been selling health insurance since 1979, said details of the new plans and new rates won’t be available until October. Open enrollment for clients begins Nov. 1 and closes Dec. 15, so people buying insurance will have six weeks to decide what they are going to do for 2018.

For people who are sick or older, all choices are expensive, and anyone not buying insurance is subject to a fine. But there are alternatives for people who are healthy or willing to forego certain benefits, such as prescription drug coverage.  Jaboro said he is selling a product called a “ministry plan,” that does not cover pre-existing conditions for 24 months and provides no prescription drug coverage, but can be had for half the premium of a plan from a traditional carrier and qualifies as “insurance” for the purposes of avoiding a fine.

Notter said alternatives include establishing tax-protected Health Savings Accounts to pay for routine care, and combining them with high-deductible, low premium options for more expensive medical needs.

Rising premiums are not the only problem facing those buying health insurance on their own. Husaynu said insurers are changing and pulling products from the market each year. Plans that were available one year, often are not offered the next, forcing buyers to scramble for options during the short open enrollment period each year.

Making matters worse, is that many who seek health insurance are not aware that the open enrollment period is only six weeks long and buying insurance outside of it requires special circumstances, such as getting married, getting pregnant or getting fired from a job, said Jaboro.

Buying individual insurance has always been expensive, but changes in the health policy landscape have leant new complications to process.

“The rate increases are attributable to several factors,” said Notter.

“We have seen several significant factors,” said Notter. “One is the rising prices of specialty drugs that have increased rapidly. They have grown over 73 percent. What a lot of people don’t realize is that a single drug can run $50,000 to $100,000 per member. That makes up half of our pharmacy costs, just on the specialty drugs. Even though only 5 percent of our members use specialty drugs, it counts for over half of our spend. So that’s a significant driver.

“One of the others that I think surprises people is that people will buy a plan, come into the market, use services and after only a few months will drop their plan; which defeats the entire purpose of insurance where you are spreading the risk across a pool of people for an entire year, if a member comes in, pays us several hundreds of dollars in premiums for a couple of months, but uses tens of thousands of dollars of services it’s difficult to cover all of those costs.”

On the drug cost issue, Notter said a complex debate continues in Washington, with no resolution immediately in sight.

Regarding people entering and leaving insurance plans, Notter had a clearer idea of how to fix the problem.

“There has to be some teeth in the penalty (for not buying health insurance), where it doesn’t make it more attractive to stay out of the market and do things like that, than it does to stay in. If we’re going to have an individual mandate, it has to be one that is enforceable and will help keep people in the insurance market for the entire year; because that’s the only way we can be more reliable with our pricing. With all of the uncertainties, it makes it difficult to price for the risk and price responsibly.”

Perhaps the only thing that is clear is that prices for individual health plans will go up for 2018 and the larger solutions to systemic solutions are still not at hand.