Citi analyst Carl McDonald says that minimum medical cost ratio requirements released by HHS this week (see prior post) will result in lower individual health plan premiums or at least dampen the rate of premium increase.
It won’t be universal, but yes. If you’re running an individual health plan that has a 60% loss ratio today, and after all the adjustments plans are allowed, the adjusted MLR is 70%, the plan is still going to owe a big rebate to get to the 80% minimum. I think what you’ve started to see and will be seeing more of is plans lowering premium rates to bring that adjusted loss ratio closer to 80%. The thought is that a lower priced product will be better at attracting new members than maintaining the same price and writing a rebate check in July 2011. Doesn’t always mean that absolute premium dollars go down, but it could mean that a plan that was planning on raising rates 10% because of increasing cost trends doesn’t have to do that anymore.
You’ll recall during the healthcare reform debate, there was a lot of arguing over the likely impact of reform on health plan premiums. The Congressional Budget Office projected a year ago that under reform premiums for 134 million people in large groups would be flat to down, premiums for 25 million people in small groups would be flat to down, costs for 18 million people with subsidized individual plans would be down (a lot) — and costs for 14 million unsubsidized individuals would be up 10% to 13% because they’re getting much better coverage.
If you believe McDonald, the “premiums will fall” crowd may indeed have been right.
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