Kids are key fac­tor in health pre­mium surge

New rule lets in­sur­ers re­cal­cu­late the risks of chil­dren in to­tal bill.

Los Angeles Times - - BUSINESS - By Court­ney Perkes

Dede Kennedy-Sim­ing­ton, an in­sur­ance agent in Pasadena, was “to­tally dis­mayed” when she learned re­cently that the pre­mium on her fam­ily’s Blue Shield PPO would rise $391 a month next year — driven largely by huge in­creases for her two teenage chil­dren.

The cost of in­sur­ing her 16-year-old daugh­ter will surge 60% in 2018, and it will jump 38% for her 13-year-old son.

The price surge stems from a change in fed­eral reg­u­la­tions that al­lows in­sur­ers to re­cal­cu­late the health risks of chil­dren within a fam­ily’s pre­mium bill.

“This hurts us, but it will be a to­tal non­starter for a lot of fam­i­lies,” Kennedy-Sim­ing­ton said. Her two teens ac­count for more than half of the fam­ily’s 2018 pre­mium in­crease — though their cov­er­age will still cost con­sid­er­ably less than that of their par­ents.

Pre­mi­ums are ris­ing for a lot of rea­sons next year. Among the most pub­li­cized is a de­ci­sion by the Trump ad­min­is­tra­tion to stop pay­ing in­sur­ers for cer­tain sub­si­dies they pro­vide to low-in­come health plan en­rollees un­der the Af­ford­able Care Act, or Oba­macare.

An­other fac­tor is the com­pli­cated new rule, ap­proved last year by the Obama ad­min­is­tra­tion, that al­lows in­sur­ance com­pa­nies to as­sign more of a fam­ily’s over­all pre­mium cost to chil­dren in in­di­vid­ual mar­ket and small group poli­cies, start­ing in 2018.

It also al­lows in­sur­ers to charge higher rates for teens than for younger chil­dren be­gin­ning at age 15, be­cause teenagers typ­i­cally rack up big­ger med­i­cal bills. Up un­til now, the ACA has not al­lowed any dif­fer­ence in the amount charged for chil­dren from birth to age 20.

“A 15-year-old run­ning around on his bike has more chance of some­thing hap­pen­ing to him than a 7-yearold play­ing video games,” said Ron Gold­stein, chief

ex­ec­u­tive of Choice Ad­min­is­tra­tors, an Or­ange-based health in­sur­ance ex­change for small businesses. “You get into high school, there’s foot­ball and con­tact sports.”

Open en­roll­ment for 2018 cov­er­age in the in­di­vid­ual mar­ket, on and off the health in­sur­ance ex­changes, started Nov. 1.

The new age-re­lated rule ap­plies in most states. How­ever, seven states — Alabama, Mas­sachusetts, Min­nesota, Mis­sis­sippi, New Jer­sey, Ore­gon and Utah — plus Wash­ing­ton, D.C., do not fol­low the fed­eral rate­set­ting for­mula be­cause they have their own.

The U.S. Depart­ment of Health and Hu­man Ser­vices said it re­vised the way pre­mi­ums for peo­ple younger than 21 are cal­cu­lated to bet­ter ref lect the cost of med­i­cal care for chil­dren. The change will also “pro­vide a more grad­ual tran­si­tion” to pricier adult rates, the agency said.

Un­der the pre­vi­ous ACA age cal­cu­la­tions, turn­ing 21 ush­ered in an adult rate with a steep 57.5% in­crease. Adult rates then typ­i­cally in­creased in­cre­men­tally each year to re­flect the higher med­i­cal costs as­so­ci­ated with ag­ing, though they are even­tu­ally capped at three times the rate of a 21-yearold to pro­mote af­ford­abil­ity for se­niors.

The for­mula for cal­cu­lat­ing an­nual in­creases for adults older than 21 will not change.

Un­der the new rule, health plans can charge a one-time 20.5% in­crease next year for chil­dren 0 to 14. For kids ages 15 to 20, rates will in­crease ev­ery year, start­ing with a sharp hike in 2018 fol­lowed by much smaller ones af­ter that.

For 2018, the in­creases range from 31.2% for 15-yearolds to 52.8% for 20-yearolds. Those hikes are al­ready baked in to the pre­mi­ums in­sur­ers have set for their 2018 of­fer­ings. And they are re­lated only to age — there may be ad­di­tional in­creases to cover the over­all rise in med­i­cal costs.

Al­though the rate hikes are big­ger for 15- to 20-yearolds, med­i­cal ex­penses for in­fants are ac­tu­ally higher, ac­cord­ing to the non­par­ti­san Health Care Cost In­sti­tute in Wash­ing­ton, D.C. They drop af­ter age 3, then rise again dur­ing the pre­teen and teenage years, ac­cord­ing to the in­sti­tute.

Health and Hu­man Ser­vices said a sin­gle rate cat­e­gory for chil­dren ages 0 to 14 makes sense be­cause it “spreads the cost of new­borns, avoid­ing sig­nif­i­cant pre­mium in­creases for fam­i­lies with young chil­dren.”

As a re­sult of the sharp one-time in­crease in 2018, a cus­tomer turn­ing 21 the fol­low­ing year would face an age-re­lated bump of only 3.1% rather than the 57.5% jump that would have ap­plied un­der the old rule, ac­cord­ing to HHS’ re­vised rate for­mula.

Some in­sur­ance agents pre­dict the bump in charges for kids will only add to a gen­er­al­ized sense of anx­i­ety about higher pre­mi­ums, par­tic­u­larly given Pres­i­dent Trump’s re­cent move to cut off fed­eral pay­ments for a key con­sumer sub­sidy, his ad­min­is­tra­tion’s de­ci­sion to shorten ex­change ope­nen­roll­ment pe­ri­ods in most states to 45 days, and Congress’ failed at­tempts to re­peal Oba­macare.

“Of all years to do this … all these in­creases are just go­ing to be hor­ri­fy­ing,” said He­lena Ruf­fin, an in­sur­ance agent in Los Angeles.

In ad­di­tion to a 12.3% av­er­age statewide pre­mium in­crease, Cov­ered Cal­i­for­nia, the state’s Oba­macare ex­change, tacked a 12.4% sur­charge onto “sil­ver tier” plans — the sec­ond-least-ex­pen­sive level of cov­er­age — to off­set Trump’s de­ci­sion to end fed­eral pay­ments for so­called cost-shar­ing re­duc­tion sub­si­dies, which lower out-of-pocket costs for some low-in­come con­sumers.

Cov­ered Cal­i­for­nia spokesman James Scullary said the 2018 rate hikes will be off­set by a cor­re­spond­ing rise in pre­mium tax cred­its, so the vast ma­jor­ity of con­sumers who qual­ify for those cred­its will be pro­tected from the sur­charge.

Peo­ple like Kennedy Sim­ing­ton, who buy their in­sur­ance in the in­di­vid­ual mar­ket out­side of Cov­ered Cal­i­for­nia, don’t have sub­si­dized pre­mi­ums.

Nei­ther do em­ploy­ees of small businesses, who are also sub­ject to the new rates for chil­dren. One re­newal no­tice for a small-group Health Net PPO, which cov­ers three adults and two teenagers, shows that the kids — ages 15 and 18 — ac­count for 60% of next year’s to­tal $412 pre­mium in­crease.

Some health plans are send­ing de­tailed no­tices to en­rollees af­fected by the rate change. Kaiser Per­ma­nente’s FAQ, for ex­am­ple, de­scribed 2018 as a “tran­si­tion year” in which all mem­bers un­der 21 will ex­pe­ri­ence “sig­nif­i­cant in­creases.” (Kaiser Health News, which pro­duces Cal­i­for­nia Health­line, is not af­fil­i­ated with Kaiser Per­ma­nente.)

But there may be one small sil­ver lin­ing: Adults may ben­e­fit, at least mod­estly, from spread­ing the ris­ing cost of med­i­cal care across a wider age band.

Perkes writes for Cal­i­for­nia Health­line, a prod­uct of Kaiser Health News.

Ir­fan Khan Los Angeles Times

THE NEW age-re­lated rule ap­plies in most states. Above, a fam­ily in the City of Com­merce gets in­for­ma­tion about the Af­ford­able Care Act in 2014.

Mar­cus Yam Los Angeles Times

THE STATEWIDE 2018 pre­mium in­crease for Cov­ered Cal­i­for­nia av­er­ages 12.3%. Above, the ex­change’s direc­tor, Peter V. Lee, cen­ter.

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