Western Health Advantage (WHA) unveiled their new line of individual health insurance plans to their Sacramento area brokers this past Friday morning. From the limited number of plans, simplified rate structure and underwriting, it is evident that WHA is positioning itself to participate in the California Health Benefit Exchange set to open in 2014.
Starting off small
In contrast to their 5 family of employer group plans, WHA will be offering only 3 individual plans. These plans were taken from existing offerings and tweaked to meet the individual market. There is the benefit rich Individual Advantage 15-30, the more traditional Individual Advantage St40 with higher copays and coinsurance and the HSA compatible Individual Advantage 1800.
Mysterious medical underwriting
The part of the presentation that generated the most interest and questions was the portion on medical underwriting. WHA has contracted with Medwise Partners to perform the medical underwriting on their individual applications. Because WHA has only offered employer group plans that are essentially guarantee issue, they have never had to set up a costly medical underwriting department.
How many points did you get?
WHA will be using a points system to measure if a candidate is approved or declined. Based on age and gender, each applicant will have assigned a specific point value. If the applicant’s accumulated points are equal to or lower than their assigned value, they are approved. If their points exceed the allotment for the typical person at their age and gender, they will be declined. Points are accumulated because current medical conditions, height, weight, current prescription use to name a few. There is also a list of medical conditions that trigger an automatic decline such as heart disease and AIDS.
The whole issue of medical underwriting, and why an applicant is declined, can frequently be a mystery to both the individual and the broker. It was refreshing to hear a discussion from the insurer of what system they were using for the determination of issuing a health insurance policy.
Standard rates are not so standard
For most health insurers the medical underwriting will create what is know as a “rate up”. An applicant may have some medical issues, but instead of declining a policy, the insurer will offer the selected plan at 10% – 50% above the standard rates. WHA will not be rating up any applicants. Adults without guarantee issue status will either be accepted or declined. Of course, I was sitting at the table wondering if WHA will have a higher rate of declines because of the pass or fail process.
In keeping with their theme of simplicity, WHA will only have three different rate structures. First, dependents under 18 years of age applying for coverage outside of a qualifying event like loss of coverage, will receive a rate of 120% of the standard rate until their next birthday. Some insurers are applying rate increases of 200% to guarantee issue child only policies.
Second, everyone that is offered a policy after underwriting will receive the published standard rate. No “rate ups” for current medical conditions. Finally, those folks that are eligible for the guarantee issue HIPAA policy will be offered 170% of the standard rate. While that sounds horrendously high, it is actually in line with what other carriers are offering on their HIPAA policies.
Can they maintain that great MLR?
It was also interesting that WHA mentioned that their current Medical Loss Ratio (MRL) was 92%. The Affordable Care Act is mandating that health insurance companies must meet an 80% MLR. There are several companies that have not met the 80% rule and are issuing credits and rebates as set out in the ACA regulations.
Playing with the big boys
Several folks within California state government have indicated that if all or part of the ACA is struck down by the Supreme Court, California will move forward with health benefit exchanges and healthcare reform. It is a smart move on the part of WHA to get into the individual market regardless federal healthcare reform law. They have a strong line up of physician groups and hospitals which, as an HMO, can strongly compete with Kaiser Permanente in the Sacramento Region.