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Insurer doubts statewide increase in health plans

January 21, 2014
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Insurer doubts net increase in health plans
Joan Budden. Courtesy Priority Health

The uninsured and others still have 2.5 months to sign up for government-subsidized private insurance under the federal health care law without facing a tax penalty.

But one Michigan insurance executive said she doubts much new enrollment will occur before the March 31 deadline and cautioned that the net number of people buying their own insurance in the state could stay flat or even dip slightly this year.

Priority Health's chief marketing officer Joan Budden said in a recent interview that while the insurer saw a 30-percent jump in customers buying individual plans in the last quarter — from 20,000 to 26,000 — most of its new customers switched from other insurers that canceled their policies or from employers who dropped coverage.

She also estimated that just 10 percent of customers bought new plans compliant with the health law, while the rest chose older cheaper plans — which the state had allowed Priority Health to keep selling temporarily even before President Barack Obama let insurers continue canceled plans for a year.

Michigan had about 275,000 residents in the individual insurance market last year, and Budden said Priority projected it would grow by 250,000 people in 2014 because of the health law. Enrollment began Oct. 1 and goes through March 31.

"I don't think we've gotten a fraction of that," Budden said, basing her thinking on the company's experience and what she's heard elsewhere in the industry.

Though many insurers have been tight lipped about sign ups, Grand Rapids-based Priority Health opened up some about its experience.

The insurer also is expected this week to release results of a survey of customers who recently bought individual plans.

Budden said despite outreach efforts ramping up in the new year, she expects the heaviest amount of enrollment occurred from October through December, because customers wanted coverage Jan. 1.

The flawed rollout of the federal insurance website and Michigan's earlier decision not to create its own site didn't help with enrollment efforts, Budden said.

But she said a bigger concern is that young and healthy residents are balking at the cost of plans even if they qualify for tax subsidies.

"It's still sticker shock," Budden said. "The cost of insurance for individuals went up substantially."

She said while tax credits are helping to bring down premiums, consumers can face deductibles of $2,000 and other out-of-pocket costs. The penalty for not having insurance in the first year is $95 or 1 percent of income, whichever is higher.

"Are those policies perceived as valuable?" Budden said, noting they also may come with narrower provider networks.

Insurers need younger and healthier customers to subsidize the coverage they give older or sicker customers.

Americans in their 60s generally use about $5 in health care for every $1 used by those in their 20s, but the law limits insurers to collecting $3 in premiums from that 60-year-old for every $1 they collect from a 20-something.

Insurers also must cover a list of essential services, ranging from mental health treatment to maternity care.

Through Dec. 28, nearly 69,000 Michigan residents had chosen an insurance plan from the government website, a 10-fold increase over the first two months of enrollment.

The Obama administration was unable to say how of many of those enrolling for coverage previously were uninsured. They might have been among the 225,000 Michigan residents whose previous policies were at risk of being canceled, because they didn't meet the law's standards.

Budden said the expansion of Medicaid on April 1 is "very exciting," because it provides more certainty that the uninsured will get coverage. Michigan's expansion under the health law is estimated to provide government-funded medical coverage to 320,000 more low-income adults this year and a total of 450,000 within three years.

"The most important part in the whole thing in my mind was expanding Medicaid," Budden said. "Hopefully, that goes really well."

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