New Mexico: ANOTHER reason why the current 2016 "rate increase requests" are highly misleading

I've written a lot about how the 2016 policy rate increase request numbers flying around in scary-sounding headlines at the moment are misleading for a bunch of reasons:

• 1. They may not be weighted by company market share
• 2. They may not be weighted by metal level
• 3. The percentages listed may be based on relatively small dollar amounts
• 4. NONE of them have actually been APPROVED yet
• 5. Shopping around could make many "increases" moot
• 6. HHS's "rate review" tool only includes increase requests over 10%
• 7. In some cases, the policies listed may not even exist yet

Today I've learned of another example of why it's silly to start wringing your hands yet. This morning I received the following tweets

@charles_gaba 1. Just got some interesting info. BCBS's "50% premium increase" in NM isn't due to premium hikes. They're dropping cheaper

— Colin Baillio (@colinb1123) June 13, 2015

@charles_gaba 2. plans completely - shedding enrollees on those plans. Their cheapest plan is now 50% higher than the previous plans

— Colin Baillio (@colinb1123) June 13, 2015

@charles_gaba Dropping the cheapest bronze and silver plans. Still offering plans in both categories

— Colin Baillio (@colinb1123) June 13, 2015

I inquired further, and from how he described the situation, it sounds like here's what's going on in New Mexico:

Let's say that in 2015, Blue Cross of New Mexico offers two different Bronze plans, priced (for simplicity's sake) as follows:

• Bronze A: $200/month (50,000 people enrolled)
• Bronze B: $300/month (50,000 people enrolled)

In this scenario, the weighted average premium for "Bronze Plans" would be $250.00/month.

Now, let's say that for 2016, Blue Cross of NM decides to drop Plan A completely and only offer Plan B...with a 10% price increase:

• Bronze B: $330/month

A rational person would say "they dropped one plan and increased the price of the other one by 10%".

If I'm understanding the NM situation, however, in New Mexico, the official claim is that Blue Cross would be defined as having requested a 32% "average" increase:

• $250/month >> $330/month

If this is an accurate representation of what's going on in New Mexico (and I'm still not quite sure that this is the case...the actual rate filings, while easier to go through than some states, still make it a bit confusing), then you might as well ignore some of these "rate increase" reports completely, because they're essentially meaningless.

Now, don't get me wrong: If you're one of those enrolled in that $200/month Plan A which is dropped, this is still a serious problem, because it means that you'll be forced to either a) switch to Plan B at a 65% increase ($330 vs. $200) over what you were paying this year or b) shop around for a different plan offered by someone else at a lower price...but that's exactly what you're supposed to do, and this is exactly what happens in every other retail market known to man.

Sometimes companies simply decide that they don't want to target the lowest price points they can, preferring to focus on a higher price point market. This is why Apple's lowest-priced traditional laptop computer starts at $899 while Dell's start out as low as $219. There's nothing evil or nefarious about this; Apple is just targeting different consumers, that's all. If Dell were to suddenly decide to drop their bottom-end laptops and only sell mid-range laptops starting at, say, $500 and up, then the next time their loyal customers need to replace their laptops, they'd have to either upgrade to a mid-range model or switch to a competing lower-end product from HP, Lenovo or whomever. Of course, I'm presuming here that the "Plan B" example listed above actually includes better coverage/service for the increased rate than Plan A did.

You either accept that the ACA exchanges use a "free market competition" philosophy or you don't. One of the key tenets of this philosophy is that competition allows consumers to choose based on various factors, including price...but that only works if the consumers actually do shop around and compare.

It's possible that Mr. Baillio and I are misunderstanding how the rate filings work. However, this certainly sounds like a variant of bullet points #5 and #7 above: A "massive" rate "increase" being caused by pushing current enrollees off of one plan and onto a different plan. That's an issue worth discussing, but it's not the same as claiming that the rate for the exact same policy has gone up 65% (or even 32%) when in fact it's only gone up 10%.