Projecting Health Insurance Costs Creates Headaches

The Wall Street Journal reported that insurance industry actuaries struggle to stay ahead of changes brought on by the Affordable Care Act. In the past, consumers had to tell insurers if they had pre-existing conditions likely to require costly care, and insurers could charge them higher premiums or refuse coverage outright. But now, actuaries have little basis for predicting costs and setting premiums, and often must adjust their projections and strategies on the fly.

Many actuaries say they still don’t have a clear sense of what their health costs will be this year, even as they set prices for 2015. One chief actuary told the Journal he spends 80% of his time talking to lawmakers, journalists and others outside the company, instead of doing typical actuarial work.

Actuaries also say this year’s rate process won’t be much easier than the last time. They still lack a clear picture of their customers’ 2014 likely health costs before they make their calls for 2015. It takes months for companies to process the claims that will reveal what sort of health care their enrollees are getting.

The trend for premiums next year will vary by market and by company, and several things can push rates higher, including the ratcheting-up of a health-law tax on insurers. In discussing one insurer’s quarterly financial results and whether the demographics of marketplace sign-ups are tracking to projections, a chief actuary said, “It’s not over till we have the claims in.”