Surprise!  Your health insurance rates are going to go up.  Why?  Insurance for the insurance companies…

No, I am not engaging in double-speak.  You see, the rules require that the insurance companies submit their proposed rates for 2015 by the end of May (some have until early June).  Some 5 million people signed up for Obamacare since 1 January and, more than half of that number signed up since 28 February.   This means the carriers have nary a clue as to what their exposure might be.    As such, there is no way there would be a claims history upon which the insurers can guesstimate what their costs in 2015 will be.

One insurer, the one against which had the most complaints lodged in California for their ridiculous rate increases (Wellpoint)- and the biggest player in the exchanges- is considering sending in requests for at least 10% hikes for next year.  While it won’t thrill most folks (including me- but I refuse to engage with Wellpoint), unjustified rate increases will be refunded to consumers in 2016.

Part of the problem is that there no longer are any restrictions for pre-existing conditions.  So, insurers know less about their customers.  (With no restrictions on pre-existing conditions, we don’t have to fill in forms about our health conditions when we apply for new insurance.)  This scares the bejesus out of the insurance companies, since they have no idea what their exposure to risk may or may not entail.

It also doesn’t help that many of the folks who signed up before the end of 2013 seemed to have been holding up on various expensive treatments until 1 January 2014.  Without the restrictions for pre-existing conditions, these therapies were effected early in 2014 and rang up some pretty hefty healthcare bills.

And, that doesn’t include pharmaceutical coverages.  At least in this stratun, the bills come in each month and there can be some history developed upon which the insurers can guess their 2015 exposure.  At least one pharmacy manager claims that those who signed up in late 2013 were more likely to require HIV therapies, have chronic pain issues, or suffer from depression- all of which are associated with high drug bills.

What these insurers are NOT saying, however, is that they were banking on these higher costs.  They determined their initial offering prices based upon the higher expected risk due to the lack of pre-existing condition restrictions and having sicker patient censuses.  And, Obamacare provides special “reinsurance” coverage for the insurers that lops off any higher than anticipated costs.

It also is expected that those 2.5+ million folks who signed up by the 31 March deadline are pretty healthy.  This group included most of the “young invincibles” that the program was hoping to enroll to keep the costs down for the rest of the US.  And, they signed up at the last minute once they figured out that the much-ballyhooed $ 95 penalty was a lowball quote.  (The penalty is actually the higher of $ 95 or 1% of one’s income!)

Moreover, it is unclear how many of the multitudes who signed up via the exchanges were already insured.  (I am one of those statistics-  switched my non-compliant coverage [it had a bizarre deductible that was incompatible with Obamacare] for a better plan at lower costs.)  And, switching carriers means even less information is available to the new carrier.

But, facts never seem to matter with many of these carriers.  We can only wait and see- and hope that the regulators examine the proposed increases more carefully than they policed the banks!

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