The ACA law has affected the concept of rate guarantees significantly depending on the market we're considering. Let's look at the 3 different segments
Since the ACA law, the rates for this market will change during open enrollment of each year.
This will occur Jan 1st for most ACA plans.
The carrier typically notify of their new rates around October and we'll have them loaded in the quoting engine by the beginning of Open Enrollmen t (generally Nov 1st).
This means that your rate will not change mid-year or because of a birthday.
The rates now go up each year as opposed to 5 year age bands as before.
Small Groups typically will not feel rate the rate increase until their renewal although new groups will see rates available to them increase quarterly.
For example, if your company's anniversary month is June 1st, you would not see a rate increase until the next June 1st.
This is more in line what how the market worked before the ACA law.
Medicare supplements typically see rate changes Jan 1st similarly to the individual family market.
The rate increases have generally been single digit and moderates but it's important to re-check the market each year as carriers can become more competitive based on age.
Let's first look at what has occurred historically and then try to evaluate rate increase trends going forward.
The past has not been kind to California individuals, families, or Small Group members.
Medical inflation has spiraled in the California market (and nationally) since about 1993. Primarily driven by brand-name drug utilization/cost and the escalating cost of facility-based health care (hospitals, surgi-centers, etc), we have seen double digit rate increases since then. It is less shocking now as people are somewhat expecting the increases but it was a shock during the initial few years.
The increases applied most aggressively to
the individual family health insurance plans
than to Small Group but both were affected.
Medicare supplement plans also underwent
increases annually but at a smaller clip.
The recent past has not been good.
We've seen an acceleration of rate increases resulting primarily for mandates required by Health Reform. This is to be expected considering that maternity coverage, preventative benefits, guaranteed issue for children, among other requirements have to be absorbed by the plans in the forms of higher rates.
This is our take on the situation from years of being in the California health insurance market.
The benefits are mandated to be very rich. There will be political pressure to keep the rate increases down. We think the carriers understand this and will start with high rates since they can't increase them later. The inherent design of the bill will accelerate this due to a low penalty and guarantee issue coverage. Since there will be backlash on further rate increases, the doctors will end up taking the hit.
That's our take unless there major changes and California will probably go forward with the Exchange no matter what. As we find out more information, we'll update this page and you can like us on Facebook (bottom right) for critical updates.
Some health carriers apply rate increases on the anniversary of the group and not at the focal renewal (annual increase) date. This can result in an even longer period of old rates than the 12 month guarantee.
For example, if a group's effective date is October 1st with a 12 month rate increase and the annual renewal occurs on May 1st of the following year, they will not get the increase until October of that following year.
Essentially, they will have 1 year and 6
months of the old rate. There are obviously
other considerations to take into account when
choosing a company's effective date but this is
a nice reprieve to rate increases short term.
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