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  #61  
Old 07-06-2016, 10:14 PM
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Originally Posted by cubedbee View Post
Its not low premiums in isolation. I think that lowest-in-market premiums offered by a new, unknown market entrants should be expected to raise much scepticism among consumers, as it seems like the classic case of something that is too good to be true; purchasers should be wondering what the catch is. Sick consumers have way more to lose than healthy consumers if there does turn out to be some "gotcha," so it makes sense that fewer of them would take a gamble on the low premiums from the unproven companies.
I'll buy that to some extent. Healthier people probably have more incentive to support a new entrant in general (since they've got nothing to lose in their minds).

I haven't looked at (performance of state co-op) vs. (state's general feelings towards the ACA), but I bet it's interesting.
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  #62  
Old 07-06-2016, 10:26 PM
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Not really, it could be inexperienced actuary underpricing the products. Despite lowest rate, they may not have the broker relationship to sell the product for low commission.


Are you saying they didn't factor in the commission correctly? Commission should be the easiest part. If anything, underselling should have helped them financially.

It's hard enough pricing plans as a new carrier entering a known market. Pricing for a new market altogether is tricky at best and often times closer to making stuff up that sounds reasonable and hoping for the best. Then to top that off with no Reinsurance payment. OUCH.

Curious what LOL did to their rates from 2014-2016.
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  #63  
Old 07-07-2016, 08:50 AM
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What's unique about the healthy preferring lower prices? Don't sick people prefer low prices as well?

(If the low prices were accompanied by a lack of network options, then I can see the argument. I don't know or believe that this was the case here.)
In the individual market purchasing decisions are driven by three primary factors: price, price, and price. This was true pre-ACA and we did an internal study that correlated 60% of the purchasing decision to price alone post-ACA. Commissions seemed to have an effect as did network (broad vs narrow relative to other market choices) and drug formulary. Those who are healthy tend to choose the lowest cost option because they do not plan on utilizing benefits. Sick people study plan designs and tend to anti-select between carriers based upon network (they look for specific providers) and drug formulary (they look to pay the least for their maintenance drugs). It is a fairly simple exercise to compare total costs of premium and out of expected pocket expense when you have ongoing medical costs.

If we look at the lowest cost plans in most states, they tended to have narrow networks and sometimes restrictive formularies. The sickest individuals can be expected to shy away from these restrictive plans and purchase broader networks (personally I think this is what got United in trouble). The healthy purchase the cheapest plan they can get in the metal level they want.

You can see this at another level if you run an underwritten block through HHS's risk model and compare to an ACA block. Use those corresponding risk scores and apply the risk transfer methodology that HHS uses. The much healthier underwritten block will have huge risk transfers. So large that in order to break even rates for the underwritten block need to be brought up to ACA rates or above.
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  #64  
Old 07-07-2016, 08:59 AM
WhosOnFirst WhosOnFirst is offline
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Curious what LOL did to their rates from 2014-2016.
I only looked at Chicago rates. For a 40 year old, lowest cost silver offereing on-exchange: 2014 =$314, 2015 = $212, and 2016 = $270. That's a 32% decrease for 2015 followed by a 27% increase in 2016.
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  #65  
Old 07-07-2016, 09:05 AM
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Not really, it could be inexperienced actuary underpricing the products. Despite lowest rate, they may not have the broker relationship to sell the product for low commission.
From the handful of rate filings I have seen for co-ops, those particular co-ops used a fairly reputable consulting firm to do the filings. I don't think inexperience is at play here, especially when the entire market was pretty much under priced given the risk corridor results.
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  #66  
Old 07-07-2016, 09:08 AM
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Originally Posted by WhosOnFirst View Post
In the individual market purchasing decisions are driven by three primary factors: price, price, and price. This was true pre-ACA and we did an internal study that correlated 60% of the purchasing decision to price alone post-ACA. Commissions seemed to have an effect as did network (broad vs narrow relative to other market choices) and drug formulary. Those who are healthy tend to choose the lowest cost option because they do not plan on utilizing benefits. Sick people study plan designs and tend to anti-select between carriers based upon network (they look for specific providers) and drug formulary (they look to pay the least for their maintenance drugs). It is a fairly simple exercise to compare total costs of premium and out of expected pocket expense when you have ongoing medical costs.

If we look at the lowest cost plans in most states, they tended to have narrow networks and sometimes restrictive formularies. The sickest individuals can be expected to shy away from these restrictive plans and purchase broader networks (personally I think this is what got United in trouble). The healthy purchase the cheapest plan they can get in the metal level they want.

You can see this at another level if you run an underwritten block through HHS's risk model and compare to an ACA block. Use those corresponding risk scores and apply the risk transfer methodology that HHS uses. The much healthier underwritten block will have huge risk transfers. So large that in order to break even rates for the underwritten block need to be brought up to ACA rates or above.
Confusing matters even more is the APTC impact on the price the consumer sees.
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  #67  
Old 07-07-2016, 11:39 AM
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Originally Posted by WhosOnFirst View Post
In the individual market purchasing decisions are driven by three primary factors: price, price, and price. This was true pre-ACA and we did an internal study that correlated 60% of the purchasing decision to price alone post-ACA. Commissions seemed to have an effect as did network (broad vs narrow relative to other market choices) and drug formulary. Those who are healthy tend to choose the lowest cost option because they do not plan on utilizing benefits. Sick people study plan designs and tend to anti-select between carriers based upon network (they look for specific providers) and drug formulary (they look to pay the least for their maintenance drugs). It is a fairly simple exercise to compare total costs of premium and out of expected pocket expense when you have ongoing medical costs.
I don't disagree with you. However, as I suggested above, I don't necessarily believe that the lower cost here was predicated on a worse network or worse benefits (in which case, I can't see why they wouldn't get their share of sicker folks necessarily).

And if we believe that poorer people are sicker on average, then E-Pi's (absolutely correct) point above confounds the issue further.
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  #68  
Old 07-07-2016, 12:08 PM
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Originally Posted by exponentialpi View Post
From the handful of rate filings I have seen for co-ops, those particular co-ops used a fairly reputable consulting firm to do the filings. I don't think inexperience is at play here, especially when the entire market was pretty much under priced given the risk corridor results.
Inexperience enters the equation when a fairly new management team thinks it's a good strategy to enter a market at a very low price point, possibly against the the recommendation of a reputable consulting firm who may still sign-off on the rates, in an effort to gain market share.
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  #69  
Old 07-07-2016, 12:12 PM
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I think the RA report suggests that the lower cost carriers are attracting lower risk. If we look at CA, HealthNet is the largest payer in($126M). They are also the lowest cost carrier for the majority of people in the state. In FL, Molina is the low cost carrier where they sell as well. Pay in of $219M. Molina also focuses on the low income population. If we look at their share of total FL reinsurance, it is only 3% even though they are paying in 37% of the total RA cost. This also suggests that the poor are not really sicker either.

I think that if we did a study correlating rate in the marketplace versus RA payments we will find that low premium correlates strongly to low risk. The sample size of two states from above is probably not fully credible

If I find some free time, I'll try to put something like that together.
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  #70  
Old 07-07-2016, 12:13 PM
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I haven't looked at (performance of state co-op) vs. (state's general feelings towards the ACA), but I bet it's interesting.
I would have thought so too, but thinking through a couple of examples, I don't think there's a strong relationship there.

While it's not surprising that states that didn't expand Medicaid and allowed the extension of pre-ACA policies (TN, UT) found themselves underpriced and out of business, there are an equal number of examples of states that embraced the ACA and had co-ops that failed spectacularly (NV, NY) or didn't even get off the ground at all (VT).
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