New York: 2015 rate requests pretty high, but nothing to freak out about

With all my stories about the requested premium increases in various states not living up to the "sky is falling" hype, several people have called attention to the fact that in New York State, it's not looking good:

ALBANY—New York insurance companies are looking to raise health insurance premiums by an average of 13 percent, according to proposed rates released by the state's Department of Financial Services on Wednesday.

The requests come from the 41 insurance companies operating in New York's insurance market. Last year, 16 insurers offered plans on the state's health exchange, which was created by the Affordable Care Act.

The six most popular plans on the state’s exchange requested double-digit increases in their premium rates for next year, with an average request of a 14.6 percent rate hike.

It's that last line which is the most important to consider; as I noted a couple of weeks ago regarding Michigan's requests, it's not enough to mush all of the companies together and then divide them up to get an average; you have to look at a weighted average to see how most people will be impacted. In New York's case, the unweighted average is 13%, but the average of the 6 most popular plans (out of 16 total) was higher, at 14.6%. According to the article quoted above, these 6 companies combined to make up virtually all of the NY market.

Case in point: According to another CNY article from this morning, one of the 16 companies has pulled out completely for next year...

One of the insurance companies on the New York State Health Exchange did not file the necessary paperwork to offer plans next year, according to the Department of Financial Services.

American Progressive Life & Health Insurance Company of New York, also known as Today’s Options of New York, failed to file a 2015 rate proposal, which would make the company the first to withdraw from the state's exchange.

...but take a look at the next part:

The state's exchange was created by the Affordable Care Act, and sold private insurance plans to about 370,000 New Yorkers in its first individual market offering. 

Today's Options of New York operated in 37 counties across New York State, but only 384 people signed up for its plans, according to a report from the state health department

Let's suppose that this company had stayed in the market but jacked up their rates, say, 100%? That would cause massive disruption to the unweighted average increase, but it would have virtually no impact on the actual average increase since only a handful of people would be impacted.

So why am I not panicking here? Well, for one thing, the average premium increase before the Affordable Care Act exchanges went into effect was around 10-11% per year anyway. While it would be nice to see that rate slowed down, the first 10% is pretty much baked in; it's anything over that which may be cause for concern.

Secondly, as I noted last week, there's a huge difference between what the insurance companies are asking for and what they actually get approved. As noted in the article CNY article:

Last year, insurers requested 9.5 percent increases in premiums for their individual plans, but the state Department of Financial Services, which regulates insurers, approved, on average, only a 4.5 percent increase. 

Third, as was pointed out in the comments of that piece, any increases next year are following a massive drop in the average premium for the actual policies enrolled in this year, so there's some "room for play" as the comment notes. That is to say, it's difficult to say how "bad" an increase is without knowing what that increase is from. A 14% increase from $200/month isn't bad at all; a 14% increase from $1,000/month is pretty bad.

Fourth, as I've noted before, the premiums are only part of the picture. Without knowing what the corresponding deductibles, co-pays, fees, etc. are, it's very difficult to pin down which policy actually costs more over the course of the year. Using the example I just linked to, an $800/month policy could end up costing the same or even more than a $970/month policy in real world use.

Furthermore, looking at the national picture, the so-called "rate-shock" just doesn't appear to be happening so far:

According to a PricewaterhouseCoopers analysis of 18 states' initial filings, 10 states will see average premium increases of less than 10 percent—nominal hikes in line with the standard increases that have happened every year with or without Obamacare.

The outliers so far are Indiana, with an average increase of 15 percent, and Rhode Island, where the average premium will fall by about 1 percent.

...Larry Levitt, vice president for special initiatives at the Kaiser Family Foundation, said he's surprised by the variation in proposed changes but that on average, premiums are working out to about what he expected: hikes of 7 percent to 8 percent in most places.

So, the short answer is, until we know what premium rates are actually approved, there's nothing to freak out about...yet.