The Kentucky Health Cooperative, the largest insurer on Kynect, Kentucky’s Obamacare health insurance exchange, proposed a 25.1 percent health insurance premium rate increase for 2016.
Despite the daunting numbers, Kentucky Gov. Steve Beshear (D) is unconcerned about the double-digit rate in his administration’s signature policy.
“System-wide averages don’t give a good picture of what an individual’s out-of-pocket costs may be,” Beshear said.
Beshear bypassed the legislature and created Kynect, the nation’s first state-run health-insurance exchange, through an executive order.
“The rates for private health plans on Kynect have been filed but have not yet been approved or certified, so we don’t yet know what the final numbers will be,” Beshear said. “Changes still may occur, and rates should be finalized sometime in mid-July, but we do expect that some plan rates will go down, some will go up, and some will stay close to the same as last year.”
Financial Problems Loom
In May, Standard and Poor’s (S&P’s) reported Kynect is in serious financial trouble, especially because no federal bailout money will be provided after 2016, when Obamacare’s risk corridor program ends.
S&P’s report indicates the Kentucky Health Cooperative booked an amount of risk corridor receivables, which is money from a risk pool paid out in varying degrees to insurers who collected significantly less in premiums than the cost of providing benefits, equal to 117 percent of its capital. Kentucky had the second highest number of risk corridor receivables in the nation in 2014.
Rate Hikes Will Vary
Beshear says rate changes will impact enrollees differently depending on their region, age, household income, and smoking status, and he argues the average numbers don’t specify how much those rate fluctuations may affect individual policyholders.
Despite Beshear’s assurances, all enrollees will pay significantly higher premiums in 2016.
BlueCross BlueShield of Tennessee’s 36.3 percent average premium rate increase will result in increased premiums ranging from 19.5 percent to 59.5 percent. The top end of premium increases in New Mexico, where exchange market leader Health Care Service Corp. is asking for an average hike of 51.6 percent, would be even steeper.
The current 25 percent increase sought by the Kentucky Health Cooperative would mean the cooperative will have increased rates by 45 percent in Kynect’s first two years of existence.
Unintended Consequences Cited
The announcement of proposed premium increases arrived at the same time as a recently released report from Families USA, which found one in four people with health insurance plans purchased on government-operated exchanges skip doctor’s visits and important medical tests because of high deductibles. The number is closer to one in three among poorer enrollees, the report says.
John Garen, an economist at the University of Kentucky, says the massive regulatory agenda of Obamacare is doing great damage to the health insurance and health care markets.
“It’s frustrating, because it’s like sticking your thumb in a leak—you stick it in and five more leaks pop up,” Garen said.
“If you want to help people who are poor and sick, ruining the market, as the Affordable Care Act threatens to do, isn’t the way to do it,” Garen said.
Garen says targeted policies are needed, such as funding for high-risk pools or vouchers that serve as private insurance for those in need of a safety net without ensnaring the whole population.
“Such an approach puts individuals back in charge of their own health care and reduces costs, which is one of the most important steps we can take to get back on the tracks toward a viable and affordable health-care policy,” Garen said.
Political Battle over Kynect
Kynect’s viability has been a hot topic during Kentucky’s 2015 gubernatorial campaign, which will replace Beshear, who is constitutionally barred from seeking a third term.
Jack Conway, the Democratic nominee, is backed by Beshear and supports Kynect. In contrast, Republican nominee Matt Bevin proposes eliminating Kynect and moving its enrollees to the federal exchange. State Senator Jimmy Higdon (R-Lebanon), who serves on the state Senate’s Health and Welfare Committee, also supports ending Kynect.
“I don’t think we need it, and we can’t afford it,” Higdon said. “I think that it could be handled through the federal government. The state would save around $30 million a year by not having to operate its own exchange, and it’s not an overwhelming number of people we’re talking about—about 100,000. The federal government, in taking them on, would barely notice, but it would greatly help our state budget.”
Higdon says he supports plans to hold hearings by the state Senate’s Health and Budget Committees in the fall before the legislature begins working on its biennial budget in January.
“Getting information on Kynect from this administration is like pulling teeth,” Higdon said. “I think we would be surprised at what we find this administration has really spent on marketing, advertising, and operating this plan.”
Jim Waters ([email protected]) is president of the Bluegrass Institute, Kentucky’s free-market think tank.
Families USA, “Non-Group Health Insurance: Many Insured Americans with High Out-of-Pocket Costs Forgo Needed Health Care”: https://heartland.org/policy-documents/non-group-health-insurance-many-insured-americans-high-out-pocket-costs-forgo-neede