The supporters of the Affordable Care Act would have a better argument against “repeal” if not for the astronomical premium increases. So, let’s talk about how to bring down premiums.

 So far, selling health plans across state lines and GI with 12/6 Pre-ex have started to get feedback. Thanks to all of you who emailed or commented back.

This post will address the severe impact on pricing caused by the ACA and how health plan premiums can be more effectively priced.

It would be accurate and easy to say that the ACA actually did and does push premiums higher without even addressing the lower benefits or less access to care. But the truth is that many provisions actually do force rates higher without any means for insurers to make a difference.
Let’s identify a few.

*Minimum Loss Ratios – MLRs forced carrier rates higher
*3:1 pricing ratio – Top rate can’t be more than 3x the lowest rate
*Taxes – at least 18 various taxes
*Exchanges – every rate had fees baked in to fund exchanges
*Pcori – Patient Centered Outcome Research Institute (Seriously?)
*TRF Fee – Charged to every premium payer to offset carrier losses.
*Mandated benefits – too many to list but clearly drive premiums up
*Metallic levels – Actuarial Value but not “real value” of plans

So, how can plans get their premiums lower?
Just a few ideas:

*Eliminate the costs associated with the list above.
*Let insurers build plans appealing to the public
*Let carriers price based on experienced actuarial principles.
*Allow a Risk Adjustment Corridor of Plus or Minus 10%.

Finally, but not the last factor, would be to prevent state legislatures or DOIs from implementing artificial pricing controls such as they have done on re-insurance stop loss plan premiums in many states such as California and others. These arbitrary restrictions eliminate an entire market alternative for employers with fewer than 100 employees.

It would be wise to set a reasonable minimum plan benefit level of essential health benefits but from there let insurers price their plans as they decide and let them compete. Insurers and more critically reinsurers do not want to underprice their plans but they do know how to get competitive. Let’s give them a chance to compete!

The actuarial process of pricing plans is far more intricate than most realize. But, it also involves assumptions with business decisions based on experience. These business decisions create the free market competition we all desire.
Let me know what you think.

Let’s discuss transparency next time.
And remember, we are all in this together.

Mark Reynolds, RHU

One Response to “The supporters of the Affordable Care Act would have a better argument against “repeal” if not for the astronomical premium increases. So, let’s talk about how to bring down premiums.”

  1. Mark Rogerson Says:

    I’ve said it before and I’ll say it again, Trump should make you his Health Czar.

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