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Obamacare: Will Year 2 be more expensive?

With the results sure to affect politics as well as pocketbooks, health insurers are already preparing to raise rates next year for plans issued under the Affordable Care Act.


With the results sure to affect politics as well as pocketbooks, health insurers are already preparing to raise rates next year for plans issued under the Affordable Care Act.

But the size of these increases is tied to insurers' ability to predict how newly enrolled customers - about whom little is known regarding health status - will affect 2015 medical costs.

"We're working with about a third of the information that we usually have," said Brian Lobley, senior vice president of marketing and consumer business at Independence Blue Cross, Philadelphia's dominant health insurer.

At stake are price increases that buyers on the health exchanges will encounter when they get renewal notices later this year. The official 2014 enrollment period closed at the end of March for most consumers. But carriers selling plans on the exchanges must file initial 2015 rate requests in late May or June.

WellPoint, the biggest player in the online marketplaces, is already talking about double-digit rate hikes. Such increases would give ammunition to Republican critics of Obamacare before the November elections.

Analysts' expectations vary.

"We'll see rate increases in the marketplaces, but I think it's anyone's guess" regarding the precise changes, said Sabrina Corlette, project director at the Georgetown University Center on Health Insurance Reforms. "It's like nailing Jell-O to a wall."

The health law required insurers to accept all applicants without asking about existing illness, making it likely they will sign some sicker, more expensive people who were previously denied coverage.

At CoOportunity Health, a nonprofit carrier in Iowa and Nebraska, many enrollees scheduled medical treatments as soon as their new coverage began Jan. 1, said Cliff Gold, the center's chief operating officer. Among the procedures were several expensive transplant operations including heart-lung procedures that can cost more than $1 million each.

Insurers tend to receive pharmaceutical claims long before hospital bills and are poring over these early prescription records for clues.

Pharmacy-benefit manager Express Scripts published data April 9 showing that marketplace enrollees in January and February were substantially more likely than average to have high-cost ailments.

But that doesn't necessarily mean average costs will soar.

For one thing, insurers figured they would cover more sick patients this year and priced plans accordingly. Early pharmacy data at IBC, said Lobley, are "on par for what we expected."

Even if carriers signed more chronically ill customers than planned, the health law includes reinsurance and other safety valves designed to keep high-cost members from pushing up rates.

A sign-up surge at the end of March is another reason not to rely on early claims information.

These enrollees seem to have been younger on balance, though their health status remains largely a mystery.

"It is an actuarial nightmare to try to guess what you're going to get," said Gold, of CoOportunity Health.

And they need to look at the big picture.

What economists call the cost trend - how high prices rise per procedure and how many procedures Americans get this year - may be the single biggest variable in setting prices for 2015. After several years of relatively tame increases, analysts saw medical spending accelerate late in 2013.

But officials from Independence Blue Cross believe it will take time for the picture to become clear.

"We always viewed this as a three-year plan," Lobley said. "We always thought there would be a lot of volatility in years one and two. We really thought 2016 would [bring] market stability in the individual market."