AET Aetna Inc. (delisted)

By Louise Radnofsky and Stephanie Armour 

WASHINGTON -- The first handful of states to release approved rates for people who buy health insurance on their own are so far consistent with what many expected: significant increases in premiums for 2017.

The Obama administration, seeking to reassure consumers who could be concerned by increases in more states in the coming weeks, released an analysis showing financial help from the government could soften the blow for people who qualified.

Some insurance regulators have begun announcing their approval of rate increases, including an average jump of 62% for the biggest plan in Tennessee and increases of around 43% in Mississippi and 23% in Kentucky for large carriers.

The Department of Health and Human Services said in an analysis issued on Wednesday that tax credits available to some lower- and middle-income Americans, which are pegged to the cost of insurance in a particular area, would blunt the impact and ensure that around three quarters of the people who obtained insurance through HealthCare.gov would pay $75 a month or less.

"Headline rate increases do not reflect what consumers actually pay," said Kathryn Martin, acting assistant secretary for planning and evaluation at the department, which also said the federal government was still on track to spend less on the law than originally forecast by the Congressional Budget Office.

Health plans, stung by large losses in the rocky early years of implementation of the 2010 health law, say they need to raise prices substantially to stay afloat.

Federal officials say some of the increases reflect the planned end of provisions in the law designed to cushion insurers and that other shifts are predictable, as plans adjust to the law's overhaul of insurance pricing to require it to be sold equally to all customers regardless of medical history or risk.

But some regulators say they are facing an unusually difficult scenario in which they had to choose between agreeing to the price increases or seeing the plans withdrawn from some markets entirely, as large insurers Aetna Inc. and UnitedHealthcare have already begun doing.

In Tennessee, the state insurance commissioner approved a 62% average rate increase for individual plans sold by BlueCross BlueShield Tennessee, the market leader. The state also approved a 46.3% increase for Cigna Corp. and 44.3% jump for Humana Inc.

Tennessee Commissioner Julie Mix McPeak said she had allowed Cigna and Humana to refile their proposals to seek higher rates than they had previously for 2017, something she had not allowed last year. "Two of the three health plans said they'd like to refile rates or they'd have to leave," she said. "We were very concerned it would be a domino effect. This year I felt I didn't have much of a choice."

She said actuaries reviewed the rate increase requests for 2017 and found they were justified. Insurers early in the launch of the exchange had priced premiums relatively low but had hefty claim costs. Ms. McPeak said it was unclear whether the costs are being driven by consumers who are sicker and have higher expenses than expected, or because consumers getting insured are using more health services.

"The rates are terrible for our consumers," she said. "The rates are increasing drastically. The problem in Tennessee is we had extremely high claims costs and low premiums to begin with."

The Department of Health and Human Services modeled a hypothetical scenario, it said, in which rates increased by averages of 25%.

Final rates will trickle out of the states and federal government over the next few months ahead of a Nov. 1 date for the new sign-up window. Around 9.6 million people signed up for coverage through HealthCare.gov during the main enrollment period last year, the federal government has said.

Estimates vary for how many people get individual coverage without using the site or a state equivalent, but the figure likely numbers several million. The health law's pricing rules apply to almost all individual health plans, regardless of whether they are sold through HealthCare.gov or independently.

Full premiums are borne by people who don't use the site, as well as all people with incomes above four times the poverty line, or $47,520 for a single person. The value of tax credits is on a sliding scale in which they eventually peter out.

The Obama administration and insurers are still trying to expand the number of enrollees in HealthCare.gov and state equivalents in a bid to turn the tide.

Higher rates typically push down enrollment, especially among people who don't feel they badly need health care, which can lead to a cycle of falling enrollment and rate increases.

Many insurers have said they need a larger and more mixed group of enrollees than they currently have in many places to ensure that the health law's markets stabilize.

"We've got to get a balanced risk pool, which means we need more healthy people," said Patrick Getzen, chief actuary of Blue Cross and Blue Shield of North Carolina, which has said it requested an 18.8% increase for its individual plans for next year after seeing rising costs that led to sharply increased losses on Affordable Care Act plans in 2015. The insurer said it has yet to resolve final 2017 rates with North Carolina's regulator.

In Kentucky, Anthem Inc. sought and won an increase of 22.9%. Humana asked for 33.7% and was granted 31%, the insurance regulator's office said.

In Mississippi, Humana has been approved for a 43% increase, said insurance commissioner Mike Chaney. In Virginia, Anthem has been granted its request for a 15.8% increase.

--Anna Wilde Mathews contributed to this article.

Write to Louise Radnofsky at louise.radnofsky@wsj.com and Stephanie Armour at stephanie.armour@wsj.com

(END) Dow Jones Newswires

August 24, 2016 16:41 ET (20:41 GMT)

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