Health Plans Getting More Expensive, Narrower for 2016

The picture of health insurance sold on the exchanges for 2016 is becoming clearer: Premiums are rising at a faster pace than the previous year, and insurers are gradually ditching broader networks.

This comes on top of the trend for many exchange plans to have high deductibles and out-of-pocket obligations.

Monthly premiums for the lowest-priced silver plans, which cover 70% of a person’s health costs, have median rate increases of 11%, compared with 7% for 2015, according to a new analysis from consulting firm McKinsey & Co (PDF). In fact, the rate hikes for each of the lowest-priced options in each metal tier are going up by double digits. Bronze plans, the second-most popular offering on the Affordable Care Act’s exchanges due to their cheap premiums, will have 13% higher premiums next year.

Further, roughly two-thirds of PPO plans on the exchanges are either being dropped or reduced for 2016, a Robert Wood Johnson Foundation report found. PPO products usually have broader networks of hospitals and doctors, but many insurers, such as Blue Cross and Blue Shield of Illinois, have adjusted or dropped the PPOs to save on costs.

Many health experts expected 2016 premiums would go up faster than this year’s plans. Health insurers finally had a full year of data from 2014 to base their medical cost assumptions on, whereas they were mostly guessing in the dark for the first two years. The final rate hikes have generally been lower than what was requested. Shopping around, as well as premium and cost-sharing subsidies, will protect most people from the high rate increases.

The amount that premiums are increasing also varies on specific type of plans. For example, the McKinsey analysis looked at the lowest-priced silver plan. The federal government, meanwhile, said the average premiums for silver-level benchmark plans—the second-lowest-cost options—are going up by 7.5% next year. Both data sets give a narrow snapshot, albeit for the most popular plans.

Perhaps more concerning for some consumers is the continued shift toward narrow networks. Health insurers have argued they can keep premiums lower if they restrict patients to a more limited set of higher-quality, low-cost hospitals and doctors.

Although many consumers may not understand the nuances of their health plan’s networks, or the surprise bills that could accompany them, they are choosing narrower options because they want the most affordable coverage.

“Despite the concerns that have been raised about narrow-network plans, surveys show many consumers are willing to give up access to a broader group of providers in exchange for lower premiums,” Katherine Hempstead, the health insurance director at the Robert Wood Johnson Foundation, wrote in her report.

The McKinsey analysis also showed that hospital-owned health plan offerings on the exchanges increasingly have the cheapest silver options and are eating into the dominance of Blue Cross and Blue Shield. Approximately 17% of the lowest-priced silver plans for 2016 are from provider plans, up from 10% in 2014. Blues plans have 24% of the cheapest silver plans for 2016, down from 45% in 2014.

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