WPS Health Insurance plans on taking a cautious approach to new marketplaces, where hundreds of thousands of people in Wisconsin may start buying health insurance in October.

The new marketplaces, known as exchanges, are part of the Affordable Care Act, and Madison-based WPS isn't alone in its caution.

Other health insurers also are wary of the new marketplaces and the pending changes from the law.

"We think some of the predictions will be incorrect," said Mike Hamerlik, president and chief executive officer of WPS. "We just don't know which ones yet."

With enrollment to begin in four months, the public still doesn't know how many insurance companies will sell plans for individuals and small employers on the exchanges and what those plans will cost.

Insurance companies had to tell state regulators this month whether they were considering selling health plans on the exchanges. But that information isn't public, and the companies have until September to make a final decision and to set prices.

It's just one example of the uncertainty surrounding the historic effort to expand insurance coverage for tens of millions of Americans and hundreds of thousands of people in Wisconsin.

New regulations — particularly the requirement that health insurers accept new customers who have health problems — will remake the market for health insurance sold to individuals and families.

The regulations are projected to increase the cost of health insurance for some people, such as young men, while decreasing the cost for others, such as people who are older and less healthy.

"It really does depend on where you land," said John Kelly, chief marketing officer of Security Health in Marshfield.

But the cost of the health plans sold on the exchange could determine how many young people buy insurance or opt to pay a penalty of $95 or 1% of their income, whichever is larger, in the first year.

That matters because people who are young and healthy are needed to help offset the cost of covering people with health problems. How many of them will buy insurance is anyone's guess. And this has added to insurance companies' unease about participating in the exchange and how to price their health plans if they do.

"All insurance companies are struggling with this," Hamerlik said.

WPS covers about 164,000 people in health plans sold to individuals and small employers. It won't sell plans on the exchanges next year. But Arise Health Plan, a subsidiary based in Green Bay that operates in north-central and eastern Wisconsin, will participate in the exchanges to test the market.

"We need to be cautious," Hamerlik said.

Security Health, an affiliate of Marshfield Clinic with about 200,000 people in its health plans, will participate.

Kelly acknowledged that pricing the plans will be a challenge.

"But any time you are dealing in a competitive market, price is always a challenge," he said.

The largest health insurance companies in southeastern Wisconsin — UnitedHealthcare, a unit of UnitedHealth Group Inc., Humana Inc. and Anthem Blue Cross and Blue Shield of Wisconsin, a unit of WellPoint Inc. — declined to disclose their plans.

Assurant Health, based in Milwaukee, which focuses on insurance sold to individuals and small employers, said it was still evaluating its options and fine-tuning its strategy.

Health insurers are expected to continue to sell health plans outside of the exchanges. But only plans sold on an exchange will be eligible for subsidies, in the form of tax credits, for people with low-to-moderate incomes who don't have access to affordable health insurance through an employer.

The subsidies will limit the cost of a benchmark health plan to 2% to 9.5% of household income. But even with the subsidies, health insurance still will be expensive.

For example, someone making roughly $12 an hour — $25,000 a year — could pay an estimated $1,703, or about $142 a month, for the benchmark plan, despite receiving $1,328 in federal subsidies, based on a calculator developed by the Kaiser Family Foundation, a health policy organization.

He or she also could face out-of-pocket expenses as high as $5,200 a year.

The person could opt for a less expensive plan that costs $1,186 a year, or about $99 a month, with higher out-of-pocket expenses. And people under 30 and those who cannot find a plan that costs less than 8% of their income will have the option of buying less expensive plans designed to cover catastrophic expenses.

The subsidies are larger for people with incomes below 200% of the federal poverty threshold — about $23,000 for an individual. But the subsidies drop sharply for people with incomes above 300% to 350% of the federal poverty level — about $34,500 to $40,215 a year for one person.

This is why health insurers are concerned that many people who are young and healthy will opt to pay a penalty in the first year. The penalty increases in subsequent years, eventually reaching 2.5% of household income in 2016. But the first year is what worries health insurance companies, given that premiums could increase significantly because of the law.

America's Health Insurance Plans, the health insurance industry's trade group, is warning of "rate shock" for some customers. And the Society of Actuaries predicted that insurers' costs could increase on average 32% nationally and 80% in Wisconsin by 2017.

The Society of Actuaries report is just a projection, and the increase in premiums will vary by state and market and by person.

At the same time, the requirement that health insurers spend 80% of each dollar in premiums on medical claims could help hold down increases in premiums. And the exchanges could increase competition among health insurers by making it easier for people to compare and shop for health plans.

But the cost of health insurance sold to individuals and their families will increase, and the increases could be significant for some.

The main reasons for the increases are regulations that require insurers to cover people with pre-existing health conditions, that limit how much insurers can charge older people and that will provide better benefits.

Basically, the overall market will include more people who are less healthy — many who in most states now are locked out of the market.

In Wisconsin, those costs will be partly offset by the end of the tax on health plans sold in the state to help fund the Health Insurance Risk-Sharing Plan, or HIRSP, which covers people who can't buy commercial insurance because of pre-existing medical conditions. HIRSP will stop offering coverage at the end of this year, and the people who are now covered by its health plans will have their choice of commercial health plans.

Health insurers also are wary of the glitches almost certain to accompany the launch of the exchanges.

For these reasons, many insurers are expected to wait out the first year or first few years.

The market for selling health insurance to individuals and families is a relatively small part of the total market. An estimated 180,000 people in Wisconsin are covered by health plans sold directly to individuals and families.

But the market is expected to get much bigger because of the Affordable Care Act. The first few years could be a transition period, and a rough one at that. In the long run, though, health insurers could benefit from having an overall larger insurance market.

Security Health for one is among the optimists who see the Affordable Care Act as an opportunity not only to grow but also for people to get access to care.

"The end result we hope is they end up with a better state of health and a better state of well being," Kelly said.

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Some will see premium increases

The Affordable Care Act is expected to raise premiums for some people and families who buy health insurance on their own rather than get it through an employer.

Most of the people will be eligible for subsidies, in the form of tax credits, that will offset the higher premiums.

But some people, particularly young men, could see significant increases in premiums. The main reasons for the increase include:

•Guaranteed issue: The law bars health insurers from turning away people with health problems. They will have higher medical bills and the increased costs will result in higher premiums.

•Narrow age bands: Health insurers will be allowed to charge older people only three times more than they charge younger people. The ratio often is as high as 5 to 1 now.

•Better coverage: The law requires health plans to cover a package of essential benefits, including preventive care and mental health benefits, that will be broader than those now covered by some plans.

•Limits on cost sharing: The law caps total out-of-pocket costs, such as deductibles and co-pays, to about $6,500 a year for one person and $13,000 for a family. This is lower than some health plans now sold to individuals and families.

•Lower premiums for younger women: The law bars health insurers from charging women higher rates than men. Young women now commonly pay more even when routine maternity care is not covered. Health plans also are required to covered maternity care.

•No annual or lifetime caps on benefits: The law bars annual and lifetime caps on benefits.

•Tax on health plans: The law imposes a 3.5% tax on premiums.