health care

Insurers in Tennessee Planned To Raise Premiums 29 Percent in 2017, But Now Are Asking For Even Higher Rates

Thanks, Obamacare.

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Ingram Publishing/Newscom

Under pressure from insurance companies, regulators in Tennessee have decided to give insurers until Friday to refile premium rate requests for next year.

That's probably bad news for anyone in Tennesee planning to buy health insurance through the Obamacare exchanges next year. When big insurers like Cigna and Humana filed their rate requests in June, they asked to increase premiums by between 23 percent and 29 percent, but those same insurers now say those requests were too low and will be looking to raise them, The Tennessean reports this week.

Regulators were convinced to reopen the filing period because Cigna and Humma threatened to pull out of Tennessee's Obamacare exchange unless they could hike their rates.

"In an effort to balance affordability and availability, the department will allow insurers to refile rate requests on the marketplace in order to prevent possible withdrawal," Kevin Walters, spokesman for the department, told The Tennessean.

BlueCross BlueShield, the other major insurer in Tennessee, asked for a 62 percent rate hike when it filed with the state Department of Commerce and Insurance in June. That probably gives you some idea of what the new rate requests from Cigna and Humana will be.

"This whole idea of 'if you like your plan you can keep your plan' is just turning out to be completely false," says Justin Owen, CEO of the Beacon Center of Tennessee, a think tank based in Nashville.

In an interview on Thursday, Owen said Tennesseans should be bracing for a big hit when premiums for 2017 are finally settled and criticized the Affordable Care Act for prioritizing insurance coverage over health care outcomes.

It's not just Tennessee, of course. Other states are seeing similar, massive rate hikes for 2017 as insurers struggle to cover the cost of medical claims. People getting insurance through the Obamacare exchanges have proven to be costlier than expected and regulations contained in the Affordable Care Act mandate insurers provider coverage for a wider range of care than many people actually need.

Those higher costs are forcing some insurers to raise premiums and causing some insurers to consider pulling out entirely. Aetna, a major insurer active on 15 state exchanges, has lost $200 million this year and company CEO Mark Bertolini said this week that it's reconsidering whether to continue offering Obamacare plans.

Sure, health insurance companies make lots of money and it's tempting to suggest—as Michael Hiltzik of the Los Angeles Times did this week—that the government should play "hard ball" with them and refuse to allow such massive premium hikes. But government regulators can't do that unless they want to see the entire exchange model collapse around them.

We've already seen what happens when you try to provide health insurance without letting the insurers make a profit. That was the theoretical goal of the health insurance co-ops created by the Affordable Care Act, and what has happened to them? Nothing good—and also nothing that should have surprised anyone who looked at how they were set up.

United Health, another major national insurer, has already left most of the exchanges and Humana has pulled out of some as well. The companies staying in are asking for huge premium increases—as BlueCross BlueShield did in Tennessee.

They're likely to be approved because regulators like the Tennessee Department of Commerce and Insurance are stuck between a rock and a hard place. They have to accept massive premium increases from insurers and foist that onto the people of their state, or they have to watch as more insurers follow United Health out the door.

Higher premiums aren't good news for anyone, but Owen points out something that might reasonably be called a silver lining. The coming premium hikes might encourage more doctors and patients to test out new alternatives to health insurance, like Tennessee's recent expansion of direct care arrangements.

Under provisions approved by the Tennessee legislature earlier this year, health care providers can contract directly with patients to provide basic care. Individuals and families pay a fixed monthly fee—perhaps $75—to the health care provider for access to office visits and other basic services, essentially cutting insurance companies out of the arrangement. Direct care allows patients to carry a cheaper, high deductible health insurance plan for catastrophic medical needs while paying out-of-pocket for routine visits.

It's also better for doctors' offices, which don't have to haggle with insurance companies over reimbursements and billing claims.

Some doctors in Tennessee already offered this arrangement, but legislation passed in April makes it clear that direct care contracts cannot be subjected to the same regulations as health insurance plans. In other states, doctors who have offered direct care contracts have been surprised to find they were suddenly considered to be an insurance company by state regulators.

By letting people pay for only the health care they use, advocates for the direct care model say it's essentially a market-based solution to some of the problems created—or at least made worse—by the Affordable Care Act, says Owen.

"We have to do everything we can to give patients more options, particularly in the face of these massive increases in health insurance costs," he said.