How Insurers Raise Rates: A Private Plan Vs. Obamacare

Two insurers. Two letters. One story.

My husband got a letter in the mail last week from his insurer, Aetna, alerting him to some bad news: Aetna was going to have to raise rates. Again. And a lot.

“Ugh,” my husband said to me. “Obamacare.”

“What happened?” I asked.

“Look,” he said, showing me the letter. “Costs are going up.”

“But why is that Obamacare’s fault?” I asked. “You’re not on Obamacare. I’m on Obamacare; you have regular employer-sponsored insurance.”

“Oh yeah,” he said. And laughed.

The next day, I got a letter from my insurer, Oscar, alerting me to some bad news: Oscar is going to have to raise rates. Again. And a lot.

“Hey, look!” I said to my husband. “We have two letters, one from a private insurer, and one from an insurer off of the marketplace. We can compare!”

Overall, the letters are quite different, because the companies’ tones and approaches are quite different. Oscar’s MO is to be informal, even chatty, while Aetna’s is dry and removed.

Top Line Summary

1. “Oscar is raising its monthly premiums next year. Here’s what’s happening and what it means for you.”
2. “Re: Notice of Proposed Premium Rate Change, NY Silver Savings Plus ODHDO 2700 80% and 19120NY0010304” (← these digits have been scrambled for privacy reasons in case they mean anything, which, let’s be honest, they may or they may not. Possibly they’re just there to emphasize how inscrutable and bureaucratic this whole process is and to intimidate readers from the get go.)

Introductory Paragraph

1. “What’s happening? Oscar is raising its monthly premiums starting January 1, 2017. We know this is frustrating news, so we wanted to share why it’s happening and what we’re doing about it. There’s nothing you need to do right now. We just wanted to make sure you heard it from us first.”
2. “Dear [FULL NAME], Aetna is filing a request with the NY State Department of Financial Services (DFS) to approve a change to your premium rates for 2017. New York Insurance Law requires that we provide a notice to you when we submit requests for premium rate changes to DFS.”

Again, Aetna’s letter reads like it was written by a bored robot, perhaps Marvin from Hitchhiker’s Guide to the Galaxy. Oscar’s reads like it was written by a robot that at least has been in couple’s therapy.

Why?

1. “When our costs go up, we unfortunately have to raise premiums, even though we don’t like doing so. We expect to pay at least $0.85 of every $1 we collect in premiums towards our members’ medical care, and sometimes we pay even more than that. We use whatever is left to cover the costs of running our business. Rising medical costs aren’t an excuse — in fact, they’re a big problem and part of the reason why healthcare isn’t affordable in this country.”
2. “Every year, we spend considerable time evaluating both medical cost history and rates to ensure we account for the current cost trends in the plan premium. The requested increase is directly related to the overall rising cost of health care services in New York.”

Not surprisingly, both letters cite rising costs. Aetna’s presentation is opaque. Oscar gets some points for transparency, since it cites numbers, and loses a few for disingenuousness: are we really supposed to believe they’re not actually using some of our premium dollars to make a profit? Still, the company wins the letter battle by acknowledging a fact that should be screamed from the rooftops on a daily basis: healthcare isn’t affordable in this country.

How much?

1. “Your current monthly premium is: 627.41. If approved, the proposed monthly premium will be: 728.69.”
2. “If approved, the percentage change to your premium is shown below. Your increase is based upon the quarter your plan renews. * 1st quarter, 2017: 12% increase. * 2nd quarter: 13%. * 3rd quarter: 14%. * 4th quarter: 15%.”

Interesting, right? Neither company uses dollar signs. Oscar offers plain numbers, as though those would be more palatable, and no percentages. (I’m no math genius, but it seems like the shift from $627 to $728 is slightly more than a 15% increase.) Aetna, by contrast, offers only percentages, and in a confusing enough way that it’s not immediately obvious how much more the reader will end up paying.

The bottom line is clear enough: next year is going to suck, whether you have private insurance or not. And the healthcare situation is this country is unsustainable.

Oscar’s approach is far more palatable to me, and I appreciate the company’s candor; but ultimately I’m not sure it matters much whether, when you get bad news, it comes packaged in such a way that the bearer of the bad news seems sympathetic to your plight. It’s like, while you’re being stabbed in the stomach, does it hurt less if the assailant apologizes and says, “I wish it didn’t have to be this way”?

I can’t help but compare both insurers to this Japanese ice cream company, which put out a TV commercial apologizing to customers for raising the cost of their product the equivalent of a dime — after holding it steady for twenty-five years.

The ad shows a group of workers and executives from an ice cream company lined up in neat rows in front of their suburban Tokyo factory. As gentle folk music plays, they bow in apology.

The company’s transgression? Adding 10 yen, or about 9 cents, to the price of Garigari-kun, a hugely popular soda-flavor ice cream bar.

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