The Rate Game

Patrick's post yesterday about small group renewal rates seems to have touched a nerve, and I think it's worthwhile spending some time on the whole "early renewal" issue. The premise of early renewal is that some groups may benefit from moving their renewal dates back from (say) early 2014 to late 2013. To that end, carriers have begun offering this service to existing groups.

Yesterday, Anthem sent me a list of my eligible groups, along with what they anticipate will happen to those groups' rates once community rating (and all the rest) kicks in.

As with Patrick's experience, some of my groups would actually see significant rate reductions come next year, while others would see substantial rate hikes. What became immediately obvious is that the "sicker" (and/or older) the group, the better they will fare come January 1. And, of course, the converse is also true.

As a practical matter, then, those sicker/older groups will most likely stay put, since they have nothing to gain from renewing early. But the healthier ones will most likely pull that trigger in an effort to stave off those hefty renewal rates for as long as possible.

And I'm just a very small fish in a very large pond. Imagine this scenario playing out across the country, with many (most?) of the sicker groups staying put, and the healthy ones renewing early. The practical - and obvious - result will be that rates for everyone will skyrocket as carriers seek to find a way to balance these competing forces. It's just not a sustainable model.

One of our commenters also observed, based on his own experience, that "this leads to healthier groups dropping out, and eventually the unhealthy groups are paying even more than they used to." And since the (Evil) Employer Mandate is currently on hiatus, there's really very little that can be done to stop this from happening.

Now, there is one potential reason for those older/sicker groups to take the plunge: Health Savings Accounts (HSAs). That's because, under the ObamaTax, these plans are effectively outlawed (or at least rendered much less effective) after this year. So depending on how important a given group deems its HSA to be, they may well consider keeping it (vs a lower premium) a good trade-off. We shall see.