the second opinion

What’s health insurance really going to cost?

That's the big question reporters must tackle, even as this year's game of spin the rates takes off
June 11, 2014

Let the game begin! The game of spin the rates, that is. It’s a game that pulled the media in last summer, too, as some state officials around the country were touting projected low health insurance premiums for exchange shoppers–or just-right “Goldilocks” rates–while others were blaming Obamacare for anticipated rate increases. It’s that time of year again, when insurance companies file rate requests with state insurance departments–that is, propose what they’d like to charge for the policies they’ll sell on the exchanges from November through February. These numbers, in other words, are preliminary, subject to state and sometimes federal review and approval, but you wouldn’t necessarily know that by the certainty and simplicity with which stakeholders spin them and reporters cover them (Rates increase! Blame Obamacare! Or, Rates up less than expected! Obamacare is working!). Missing in this sort of treatment, among other things, is a sense of the big picture: these initial rates don’t necessarily tell us much about what health insurance will cost individual consumers in the coming year.

So, how should reporters cover these rate pronouncements? I offer 7 suggestions further along in this post. But first, it’s instructive to take a quick look at some recent coverage. Compare, for example, two recent efforts from Ohio, where at the end of May the Department of Insurance revealed preliminarly rate filings for next year. In a May 29 piece, the Cincinnati Enquirer stuck largely with official pronouncements, reporting an expected “13 percent rise in the average premium,” according to state officials, and quoting Lt. Gov. Mary Taylor, no fan of Obamacare, who called it “bad news” for families and businesses. “It’s what we expected and it’s what the research we did in advance predicted would happen,” Taylor said. But instead of delving into the whats and whys of the expected average increase–and the caveats around the number itself–reporter Lisa Bernard-Kuhn allowed spin to take over. “The filing details spurred other Obamacare opponents to chime in,” Bernard-Kuhn wrote, offering a quote from Ohio Sen. Rob Portman who repeated the GOP mantra, “Obamacare is not working.” She did note that studies from the Kaiser Family Foundation and others show that double-digit increases pre-date Obamacare. But overall, there wasn’t much in the way of context or explanation to help readers put the rate pronouncements in perspective. (A June 2 Associated Press piece from Vermont followed a similar path, reporting that two carriers in the state increased rates, although the piece did note that “no one can predict” what final rates will actually look like.)

By contrast, on May 30, the Cleveland Plain Dealer‘s Washington Bureau Chief Steve Koff (who ably covered Ohio’s rate story last year) offered a robust, reported piece that looked at the games insurance officials can play with averages. Koff reviewed the newly filed rate requests, talked to insurers, and “found that average rates for the biggest and most popular insurers…are not rising as much as the average that [Lt. Gov.] Taylor cited.” In other words, these rate pronouncements should come with context and caveats, and it’s up to reporters to supply that. Koff did.

Premium prices are based on the ages of those expected to buy and on insurers’ expectations of the health care costs the enrollees will incur. It is too early to know how that will work out in 2014, yet the state statutory deadline for initial 2015 rate filings was last week. “So all they have now are trends and guesses,” said J.B. Silvers, a health-care finance professor at Case Western Reserve University.

And, further along:

Every price in the filings comes with caveats. The Ohio Department of Insurance must approve the requested rates, and that will not happen for several months. The US Department of Health and Human Services must then sign off, although it typically will agree with Ohio’s judgment since the state must follow ACA rules and guidelines for insurance underwriting and pricing…Also, every insurer provides an average, but the averages are based on both higher and lower premiums for specific policies.

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To “fill in some additional blanks,” Koff also did a useful Q&A-style explainer on June 2. This was good, thorough work, and Koff was not alone in that kind of reporting. The Arizona Republic‘s Ken Alltucker used news of rate increases in Arizona to examine the competitive landscape in June 2 story, and gave a nod to other factors that go into pricing–narrow provider networks, coinsurance, and deductibles–each of which could be a story in itself.

Rate proposals will continue to trickle out in other states in the weeks to come. These numbers are, again, but a small piece of broader, more important question– what will health coverage really cost consumers? Here are 7 tips for reporters following this story.

Beware of averages tossed around by state insurance commissioners. They don’t usually tell the whole story, says Jim O’Connor, an actuary with the consulting firm Milliman. “The end game is the actual rate someone pays,” O’Connor told me. A carrier that charged higher rates in 2014 may have smaller rate increases this year, while a carrier with lower rates last year to grab market share may ask for larger increases this year. But the increases themselves don’t tell you which policy has the most affordable rate. For example, in Washington state Coordinated Care Options (Centene) is asking for the second highest rate increase for 2015. In 2014, it had the lowest rates in every county where it sold policies. Molina Healthcare had some of the highest rates in Washington counties, and this year it’s asking for an average decrease of 6.5 percent.

Understand what factors make up the rate someone actually pays. Milliman’s O’Connor noted a number of them that explain the premiums besides the one that the media talk about most–the increasing cost of medical care which this year is running between four and seven percent. This is often referred to as “trend” by industry insiders. Other factors to understand include: 1) The loss of government reinsurance payments that are gradually being reduced. In 2014 such payments allowed carriers to reduce premiums on average 10 percent; for 2015 on average it will be five to seven percent; 2) Government fees imposed on carriers will boost premiums, with bigger carriers taking a bigger hit; 3) So will Obama’s transition program for people with old policies that didn’t meet the minimum benefit standards. Most states are allowing residents to keep these policies until 2017, and insurers believe the ones hanging on to them are the healthy and young, and those likely to generate few claims. Depending on how many sicker, older people move to new policies, this “transition problem” can add as little as three or four percent to the premium or as much as 15 to 20 percent; 4) Demographics matter, too–beyond the right mix of young and old the media discusses. Since rates are now the same for men and women, and women have higher medical expenses earlier in life, “gender mix does make a difference,” O’Connor told me. “Companies must now reflect the gender mix in determining rates;” 5) What effect will the high-priced hepatitis C drug Sovaldi have on the premiums everyone pays? Actuaries are examining the impact of those costs on premiums for 2015.

Compare the same demographic characteristics. When reporting on rates, are you talking about premiums for a 28-year-old or a 58-year-old? An individual or a family? Make the distinction. During the sales push for Obamacare, advocates often trotted out cheap premiums to entice people to sign up–and reporters didn’t always point this out. Showing a cheapie premium for a single 30-year-old glosses over how expensive insurance can be for families (who will pay close to $1,000 or more a month). To be honest with the public, you have to tell that part of the story, too.

Compare like plans. Simply noting that a premium you’re talking about is for a bronze or a silver plan may not be enough. You’ll have to know the exact name of the plan to make an accurate assessment of last year’s and this year’s rates. One silver plan may offer a very narrow network; another silver plan sold by the same carrier may have a broader network that costs more. Note that carriers use fanciful names that may disguise what the policy really covers.

Discuss what’s happening with networks. Network changes can mask real changes in premiums. The addition to a network of a high-priced children’s hospital or a well-known cardiologist feeds into higher premiums. The addition of these high-cost providers may be welcome news for shoppers who may have to pay more for their coverage. At the same time, if a carrier drops a high-cost provider, that may be bad news for policyholders who chose a policy because those providers were in the network. Premiums for that network, though, might be lower.

Discuss drug formularies. Differences in drug formularies (the list of drugs a health plan covers) are not part of the calculation for actuarial values (what the carrier pays in benefits relative to premiums collected), O’Connor explained. That gives insurers a lot of leeway in setting up their formularies and differentiating their products. Differences in formularies affect what people pay. To keep premiums low, companies may not cover as many drugs in a particular category, but finding this out is hard. This spring a study by the cosulting firm Avalere Health, and funded by Pfizer, found that formularies in nearly half of exchange plans are difficult, extremely difficult, or impossible to access.

Which brings me to my final tip:

Beware of the “study says” story frame. When it comes to healthcare costs, there are oodles of studies out there. If you’re going to report on one of them, be clear with readers that it is but one study among many with varying conclusions, and note who authored the study and who funded it. In early May, The Hill picked up a study from consulting firm Avalere Health–no word on funding–that concluded premiums in some states might see double digit increases this year because of the “increasing costs of medical care” (rather than because too many old people signed up and skewed the risk pool). As I noted above, increasing medical costs are only one factor driving premiums. The Hill shortchanged its readers who deserved a fuller explanation of the reasons why premiums might be in the double digits for some. In evaluating studies, reporters must separate spin and speculation from what we really know now, which will require more scrutiny of the study, how it was done and where it fits into the larger universe of work on this topic.

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Trudy Lieberman is a longtime contributing editor to the Columbia Journalism Review. She is the lead writer for CJR's Covering the Health Care Fight. She also blogs for Health News Review and the Center for Health Journalism. Follow her on Twitter @Trudy_Lieberman.