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What's not to like about Obamacare? Plenty in Illinois.

What's not to like about Obamacare? Plenty in Illinois.

People who buy health insurance through the government exchange should brace themselves for steep premium increases, fewer plans to choose from and less choice in doctors and hospitals next year.

Illinois residents who buy health insurance through the Obamacare exchange should brace themselves for steep premium increases, fewer plans to choose from and less choice in doctors and hospitals when the enrollment period for 2017 opens on Nov. 1.

Big national health insurers like Aetna, UnitedHealthcare and Coventry are pulling out of the Illinois exchange next year after substantial losses on individual plans in 2015. The Land of Lincoln co-op has been shut down after losing $90.1 million last year. And Blue Cross & Blue Shield of Illinois, which dominates the market, is raising premiums substantially and possibly reconfiguring product lines and networks after losing $488 million on the individual market (including both Obamacare lines and commercial policies) in 2015 and $290 million in 2014. For every dollar in premium revenue on individual plans, Blue Cross paid out $1.32 in medical claims and quality-improvement efforts last year.

The Illinois Department of Insurance filed proposed rates with the federal government showing that all plans operating in the state want sharply higher premiums, with Blue Cross seeking increases of 23 to 45 percent for individual plans. The state doesn't have the power to reject or modify rates as long as they are actuarially sound. The rates and network information will be finalized by the federal government in October.

“When insurers are losing money, they're going to raise premiums,” says Larry Levitt, a policy expert at the Kaiser Family Foundation in Menlo Park, Calif. “There's really no choice in the matter.”

While people buying coverage through the Illinois exchange may howl, premiums are jumping even higher in other states. For instance, the insurance commissioner of Tennessee, declaring the state's exchange market “very near collapse,” approved increases on Aug. 23 averaging 46.3 percent for Cigna, 44.3 percent for Humana and 62 percent for Blue Cross & Blue Shield of Tennessee.

In the two years that Obamacare exchange plans have been offered, insurers have been walloped by a constellation of factors. On the claims side, they are facing constant price increases for pharmaceuticals, especially specialty medications such as AbbVie's hepatitis C treatment or Mylan's EpiPen, as well as pressure from hospitals and doctors who want to be paid more. Newly insured patients also sought treatment more often than had been predicted, adding to insurers' expenses.

The insurers that have come through best—and even made profits—are those with experience serving low-income populations and Medicaid patients, such as Molina Healthcare and St. Louis-based Centene, which operates the Ambetter exchange plan in Illinois. Often their plans operate “narrow networks” with restricted choice of doctors and hospitals.

Health plans “were playing in this new market; they didn't know what it would look like,” says Kevin Lucia, a researcher at Georgetown University in Washington, D.C. “A number of them underpriced. Now they are pricing more accurately. That may be part of the reason you are seeing adjustments on premiums.”

Blue Cross is raising rates in hopes of achieving “sustainability,” says Jill Wolowitz, vice president of government relations and community affairs. The insurer believes in expanding access to health insurance for Illinoisans and intends to participate in the Obamacare marketplace for the long haul, she says. But it can't afford 10-figure losses indefinitely.

In 2014 and 2015, “we had very little claims data to go by to set rates,” Wolowitz says. “Going into 2017, we now have two full years of claims experience. We are able to more accurately predict the anticipated cost of care for our membership,” which is the primary driver of rates.

Chicago-based Blue Cross wants to offer a full range of plans in every part of Illinois, with as wide a choice of doctors and hospitals as it can provide. But Wolowitz says it won't rule out altering benefits and limiting networks of providers to avert another loss.

Most purchasers of exchange plans probably won't see rate increases directly. Eighty-two percent of those who buy Obamacare plans qualify for federal subsidies to make health insurance affordable for them. Plans are labeled platinum, gold, silver or bronze, depending on how expensive they are and how much medical expense the premium covers.

For 2017, the Insurance Department says, the average rate increase across the state for the lowest bronze plan is 44 percent. For the lowest silver plan it is 45 percent, and for the second-lowest silver plan it is 43 percent. In some parts of the state, people will be asked to pay 67 percent or 71 percent more than they did last year for a second-lowest silver plan, though offered by a different insurance company.

“The question is, will the subsidy rise commensurate with the rate increase of my current plan?” says Marc Pierce, CEO of Stonegate Advisors, a health care analytics firm in Chicago. “Whether the subsidy rise affords me greater buying power or not depends on how the other products in the market, which I might prefer to buy, are priced.”

Enrollees are very price sensitive. Forty-three percent of returning enrollees switched plans in 2016. Thus the average price increases being reported may give a misleading impression, because it's likely that many enrollees looking at further hikes will switch to cheaper plans, albeit ones with more restrictions on choice.

In mid-August, the Illinois exchange offered 22 silver plans from seven health insurance companies. Aetna, UnitedHealthcare and Coventry (owned by Aetna) will exit next year. Chicago-based Land of Lincoln failed this summer and has been removed from the website offerings.

In 2017, the Insurance Department says, six companies will offer plans in Illinois: Blue Cross, Harken Health (a UnitedHealthcare affiliate), Ambetter by Celtic, Health Alliance Medical Plans, Humana and Cigna, a new entrant that intends to cover people only in the Chicago area. But if Humana's merger with Aetna doesn't go through—the Justice Department is suing to block it—it could drop out of Illinois, too.

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