CareFirst sticker shock

The Obamacare critics were no doubt gleeful this week when CareFirst BlueCross BlueShield proposed average rate increases of 25 percent for its individual HMO customers next year, when it will be required to follow the requirements of the Patient Protection and Affordable Care Act. But before we give in to conservatives' "I-told-you-so" moment, it's worth unpacking the details of what's going on in Maryland's newly created insurance exchange. Like the sticker price on a car, CareFirst's proposal is likely not going to be the final word on what Marylanders pay for health insurance.

For starters, the 25 percent proposed increase is just that — a proposal. The Maryland Insurance Administration will scour the details of CareFirst's submission and question every assumption in an effort to provide the lowest possible cost for consumers. That's its job, not just a political act by an Obama-friendly O'Malley administration.

And there are a great many assumptions to question. CareFirst, and every other insurer on the exchange, will have to meet a host of new requirements about what coverage must be provided and to whom. Insurers will be forbidden to refuse coverage to people with pre-existing conditions, but they will also stand to get thousands of new customers because of the requirement that nearly all Americans have health insurance.

The pre-existing condition clause will undoubtedly force insurers to take on sicker — and thus more expensive — customers. The individual mandate to have insurance will presumably force many younger, healthier people into the market. The theory behind Obamacare — and the reason the insurance industry backed it in Congress — was that those two changes would at least balance each other out. Moreover, the preventive care requirements in the Affordable Care Act, coupled with the expansion of insurance coverage, should theoretically encourage more people to use more primary care and prevent the need for expensive procedures, treatments and hospital stays, thus mitigating the cost of health care in the long run.

But how that will work in practice for any given insurer is, at this point, uncertain. And CareFirst, even more than its competitors, has a reason to assume something like the worst-case scenario. The Affordable Care Act puts limits on year-to-year rate increases, which gives insurers an incentive to high-ball their proposals now. If they charge too much next year, they can — and would be required to — provide rebates to their customers. If they charge too little, they might never really be able to catch up.

That principle applies to all insurers, but in Maryland it is likely to have a stronger effect on CareFirst than other insurers, which have generally proposed smaller rate increases. The reason is that CareFirst is, by far, the dominant player in Maryland's individual insurance market, covering about 70 percent of people who buy coverage that way. If it sets the rates too low, the consequences are much greater than for companies with a smaller slice of the market. Indeed, the expectation had been that CareFirst might ask for an even greater rate increase than this one.

Even beyond the question of whether the state will manage to whittle down CareFirst's proposed costs, there are a few other reasons for consumers not to panic. For one, Obamacare comes with subsidies that will help cover the cost of insurance for many individuals and families. Medicaid eligibility will be greatly expanded as well, so some people who now rely on the individual market won't have to. Furthermore, although CareFirst and some other insurers are giving estimates for the average premium increases their customers will face next year, the comparison is not apples-to-apples. The Affordable Care Act includes requirements for what services must be covered and limits on deductibles, co-pays and co-insurance. Even if consumers wind up with higher premiums, they may also be getting a better product that costs them less out of pocket.

Finally, the point of the insurance exchange is to foster competition. Once it is up and running, individuals and families will be able to input their characteristics and their desired level of coverage and get quotes from a variety of insurers. If people don't like what CareFirst is offering, they will have a choice. And in Maryland, they will have a particularly intriguing one in the new Evergreen Health Cooperative, headed by former Baltimore City and Howard County health officer Dr. Peter Beilenson.

Co-ops were included in the Affordable Care Act as a kind of compensation for the exclusion of a public option, and because of Maryland's unique system in which hospitals charge all payers the same rates for their services, the state affords a better environment for them to flourish than most. Evergreen's promise of coordinated, evidence-based care offers the prospect of keeping its customers healthier at a lower cost than its competitors and could become a model for the nation.

The bottom line is that it is far too early to judge the Affordable Care Act's effectiveness, and this rate increase request from CareFirst is far too insignificant a piece data to come to any conclusions about whether Obamacare will ultimately drive prices up. That's not political spin, it's just the reality of an undertaking this complicated. Obamacare isn't perfect, but its principles are sound, and there is every reason to believe it will ultimately prove an improvement on an unsustainable, unhealthy status quo.

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