At first glance, Colorado would seem to be one of the federal health law’s clearest success stories, offering nearly 200 plans and average premiums nearly unchanged in the coming year.
But zoom in closer, and it is clear that a kind of pricing pandemonium is underway, one that offers a case study of the ambitions and limits of the Affordable Care Act during this second year of enrollment.
An analysis by The New York Times shows, for example, that the cost of one midlevel silver plan in Colorado rose 36 percent west of the Rocky Mountains this year, while another dropped nearly 40 percent in the northeastern plains.
The law was intended to drive prices lower and broaden coverage through competition. While 10 insurers offer plans to individuals in Colorado through the state’s online marketplace, the law does not require insurers to offer all plans in all regions of a state.
The wild disparity in prices results from many insurers trying to attract more customers by pricing plans as low as they can. But it is not at all clear that the low prices will be sustainable, so prices may well swing sharply upward as time goes on. Nationwide, some of the plans that offered the least expensive prices for 2014 raised premiums sharply for coverage this year. One insurer, CoOportunity Health, has been taken over by state regulators because of losses.
The variations in premium prices are also a direct result of what the insurer-friendly health care law permits. Insurers can target territories, choosing areas within a given market where they can attract enough members and put together provider networks that will negotiate on price. In addition, insurers were given some protection by the federal government to reduce possible losses in the early years, so some are experimenting with very low prices that may not be sustainable over the long term.
Insurers say they still do not have a firm grasp of what premium levels will allow them to cover the people who are signing up and not lose money on their medical care.
“Because we’re all working off assumptions this year, there’s been a lot of divergence in thinking,” said Neil Waldron, who oversees strategy for Rocky Mountain Health Plans. A local nonprofit insurer, Rocky Mountain offers some high-price silver plans in Denver, for instance. But it has some of the lowest-cost plans in the western part of the state.
And no one expects premium costs to stabilize anytime soon. Because buyers are so sensitive to price, the markets may experience cycles in which insurers alternately offer low premiums to attract customers and sharply raise them in later years to cover costs, experts said.
The volatility has created more uncertainty among people who must renew their plans, switch to new ones or buy insurance for the first time under the law.
Judy Greenfield, 55, from Denver, was notified in November by the Colorado marketplace that she would have to pay about $125 more a month next year for the same plan. She worked with a broker to figure out her options, and switched insurers to find a less expensive plan. “To have to go through this every year, selecting a new plan, is just a pain,” she said.
Similar disparities are found across the country, with individuals not always having access to the least expensive plan in their areas. In Hancock County, on the coast of Mississippi, for example, people must pay $153 more than people who are considered to be in the same market because not every plan is sold in their county.
Avalere Health, a consulting firm, found that the price of the silver plans that are used to determine subsidies remain the same from 2014 to 2015 in only 13 percent of regions among those states included in the federal exchange.
And some insurers seem to have guessed wrong in the first year under the health care law. In Minnesota, PreferredOne, which captured the bulk of the individual market, is raising rates an average of 63 percent in 2015 and is no longer offering policies through the state marketplace. In Iowa and Nebraska, CoOportunity Health is no longer available to new customers, and it was taken over by regulators at the end of December. The insurer was one of the so-called co-ops created under the law to foster competition.
But Colorado is an especially stark case study.
Those in the west, like residents of Vail, still pay much more for coverage because there are fewer competitors and higher fundamental costs in the Rocky Mountain resort region. The lowest-cost plans are not available, while nationally known insurers like Cigna, Humana and UnitedHealthcare offer coverage selectively and avoid large parts of the state.
Last year, in Colorado, people looking for the least expensive plans in the silver tier were drawn to those offered by Kaiser Permanente, the nation’s largest nonprofit H.M.O., which largely relies on its own doctors and hospitals to provide care. Kaiser captured nearly half of the 127,000 people who signed up through the state exchange. This year, Kaiser’s rates are rising an average of 7 percent.
This year, the state’s consumer-oriented insurer, Colorado HealthOP, one of the co-ops, has upended the market by dropping premiums for several of its plans nearly 40 percent, including its so-called Bison midlevel silver plan in Logan County in the northeast part of the state. It also offers Bobcat, Bear and Bighorn plans.
A 40-year-old person can buy the co-op’s least expensive silver plan in the center of the state for around $200 a month, before federal tax credits.
Martin Harris, a 43-year-old cook, selected one of the co-op’s plans at an enrollment event in Denver. Mr. Harris, who recently developed diabetes, found a silver plan for just $104 a month after federal tax credits.
Acknowledging that the low prices were intended to attract customers, Julia Hutchins, the chief executive of Colorado HealthOP, said: “We certainly would like to double our enrollment.” The co-op, which enrolled about 14,000 members last year, has more than achieved that goal by signing up about 50,000 members so far. Open enrollment ends Feb. 15.
A similar strategy by co-ops to use low prices to lure customers is evident in many other parts of the country. A majority of the 26 co-op plans reduced their prices for 2015, according to an analysis by the McKinsey Center for U.S. Health System Reform, a unit of the consulting firm, which noted that other new entrants, like insurers that specialize in Medicaid, are also competing aggressively on price.
But brokers and others have raised the question of whether in Colorado, the prices of the co-op’s plans are unrealistically low. “We’ve seen very aggressive pricing from some of our competitors and only time will tell if that will be sustainable,” said Michael Ramseier, president of Anthem Blue Cross and Blue Shield in Colorado, in a statement.
Colorado HealthOP, for one, says its prices are based on its best estimates and were approved by the state insurance regulator, although it emphasizes that no one knows for sure what medical costs will be. “There’s a lot of uncertainty around the individual market in the next three years,” Ms. Hutchins said.
Ms. Hutchins said it was too early to say that it had mispriced its plans. She pointed to provisions in the federal law that would limit its losses, although there is increasing uncertainty in Congress about how those provisions could be changed, leaving insurers at greater risk.
The insurers rely heavily on narrow networks to be able to offer low-price plans. The co-op, for example, was able to lower its rates by including Centura Health, a large regional system, in its most limited network, for example, and excluding some others, like University of Colorado Health.
But the state is still grappling with the notably high premiums for people in places like Vail, which had some of the highest rates in the country in 2014.
“The resort areas have always been notoriously expensive to insure,” said Mary Heidbrier, an insurance broker in Boulder. “The providers know they are the only ones on that side of the mountain path.”
Some insurers say they plan to offer policies in more high-cost mountain regions in the future.
All of which makes the markets turbulent for the next several years, if not longer, especially if the law changes under a Republican-controlled Congress. “We are set up in a very uncertain time,” said Ms. Hutchins of the co-op. “Everything we do is uncertain and volatile and changing.”