Proposals for Insurance Options That Don’t Comply with ACA Rules: Trade-offs In Cost and Regulation
Now in the fifth year of implementation, the Affordable Care Act (ACA) standards for non-group health insurance require health plans to provide major medical coverage for essential health benefits (EHB) with limits on deductibles and other cost sharing. In addition, ACA standards prohibit discrimination by non-group plans: pre-existing conditions cannot be excluded from coverage and eligibility and premiums cannot vary based on an individual’s health status. The ACA also created income-based subsidies to reduce premiums (premium tax credits, or APTC) and cost-sharing for eligible individuals who purchase non-group plans, called qualified health plans (QHPs), through the Marketplace. ACA-regulated non-group plans can also be offered outside of the Marketplace, but are not eligible for subsidies.
New: A look at the tradeoffs in costs and protections involved in four proposed health plan alternatives that would operate outside the ACA’s rules and regulations
Individual market premiums were relatively stable during the first three years of ACA implementation, then rose substantially in each of 2017 and 2018. Last year, nearly 9 million subsidy-eligible consumers who purchased coverage through the Marketplace were shielded from these increases; but another nearly 7 million enrollees in ACA compliant plans, who do not receive subsidies, were not. Bipartisan Congressional efforts to stabilize individual market premiums – via reinsurance and other measures – were debated in the fall of 2017 and the spring of 2018, but not adopted. Meanwhile, opponents of the ACA at the federal and state level have proposed making alternative plan options available that would be cheaper, in terms of monthly premiums, for at least some people because plans would not be required to meet some or all standards for ACA-compliant plans. This brief explains state and federal proposals to create a market for more loosely-regulated health insurance plans outside of the ACA regulatory structure.
Background
When ACA Marketplaces first opened in 2014, on average, the cost of the benchmark silver QHP was lower than many had predicted. Many insurers underpriced QHPs at the outset, either because they couldn’t accurately predict the cost of providing coverage to a new population under new ACA rules, or to aggressively compete for market share, or both. As a result, insurers offering ACA-compliant policies generally lost money in 2014-2016. In the fall of 2016, for the 2017 coverage year, most issuers implemented a substantial corrective premium increase for their benchmark QHP – on average, a 21% increase for a 40-year-old consumer. This increase, along with growing experience with new market rules, allowed many insurers to regain profitability in 2017, and, going forward, stabilization of QHP rates might otherwise have been expected.
Instead, though, a new wave of uncertainty arose last year as Congress debated repeal of the ACA and as the Trump Administration threatened administrative actions with the stated intent of undermining the program, including by ending reimbursement to insurers for required cost-sharing reductions (CSRs) that, by law, they must offer low-income enrollees in silver QHPs. The value of CSRs was estimated by CBO to be $9 billion for 2018. To compensate for the lost reimbursement, most insurers significantly increased 2018 premiums for silver level QHPs, through which cost sharing subsidies are delivered. Largely due to this so-called “silver load” pricing strategy, the average benchmark silver QHP premium for a 40-year-old rose another 33% for the 2018 coverage year. (Figure 1) Premiums for bronze and gold plans rose more slowly, but still substantially given uncertainty on a number of issues, including whether the ACA’s individual mandate would be enforced.
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Figure 1: Average marketplace benchmark premium for a 40-year-old has increased, but so have premium tax credits
For consumers who are eligible for APTC and who buy the benchmark silver plan (or a less expensive plan) through the Marketplace, subsidies absorb annual premium increases and the net cost of coverage has remained relatively unchanged from 2014 through today. Roughly 85% of Marketplace participants in 2017 were eligible for APTC. (Figure 2) However, for the 15% of Marketplace participants who were not eligible for subsidies, and for another roughly 5 million individuals who bought ACA compliant plans outside of the Marketplace, these consecutive annual rate increases threatened to make coverage unaffordable. That threat was even greater in some areas, where 2018 QHP rate increases were much higher than the national average.
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Figure 2: Most in ACA-compliant plans are protected from rate increases by premium subsidies
Looking ahead, another round of significant premium increases is possible for the 2019 coverage year. A new source of uncertainty arose when Congress voted to end the ACA’s individual mandate penalty, effective in 2019. The Congressional Budget Office (CBO) estimated repeal of the mandate would fuel adverse selection – as some younger, healthier consumers might be more likely to forego coverage – and average premiums in the non-group market would increase by about 10 percent in most years of the decade, on top of increases due to other factors such as health care cost growth.
ACA opponents have argued QHP premium increases reflect a failure of the federal law. As an alternative, some have proposed different kinds of health plan options to offer premium relief to consumers who need non-group coverage but who are not eligible for premium subsidies, primarily by relaxing rules governing required benefits, coverage of pre-existing conditions, and/or community rating. These include:
Short-Term, Limited Duration Health Insurance Policies
In 2018 the Trump Administration proposed a new draft regulation that would promote the sale of short-term, limited duration health insurance policies that offer less expensive coverage because they are not subject to ACA market rules.
Short-term limited-duration health insurance policies (STLD), sometimes referred to as limited-duration non-renewable policies, are designed to provide temporary health coverage for people who are uninsured or are losing their existing coverage but expect to become eligible for other, more permanent coverage in the near future. Historically, people who have used these policies include graduating students losing coverage through their parents or their school, people with a short interval between jobs, or newly hired employee subject to a waiting period before they are eligible for coverage from their job. Because these policies are not intended to provide long-term protection (they generally cannot be renewed when their term ends), they are lightly regulated by states and are exempt from many of the standards generally applicable to individual health insurance policies. They also are specifically exempt under the ACA from federal standards for individual health insurance coverage, including the essential health benefits, guaranteed availability and prohibitions against pre-existing condition exclusions and health-status rating. These differences can make them considerably less expensive (for those healthy enough to qualify to buy them) than ACA compliant plans.
STLDs are similar to major medical policies in that they typically cover both hospitalization and at least some outpatient medical services, but unlike ACA-compliant policies, they often have significant benefit and eligibility limitations. STLD policies often either exclude are have significant limitations on benefits for mental health and substance abuse, do not have coverage for maternity services, and have limited or no coverage for prescription drugs. Policies also generally have dollar limits on all benefits or specific benefits and may have deductibles and other cost sharing that is much higher than permitted in ACA-compliant plans. Insurers of STLD policies typically use medically underwriting, which means that they can turn down applicants with health problems or charge them higher premiums. Policies also exclude coverage for any benefits related to a preexisting health condition: a backstop for insurers in case a person with a health problem otherwise qualifies for coverage and seeks benefits. Because STLD policies are not renewable, people who become ill after their coverage begins are generally not able to qualify for a new policy when their coverage term ends.
Due to their lower premiums, some people have been purchasing STLD policies instead of ACA compliant plans. This has happened even though STLD policies are not considered minimum essential coverage, which means that people who purchase them do not satisfy the ACA mandate to have health insurance and may be subject to a tax penalty. In 2016, CMS expressed concern about these policies being sold as a type of “primary health insurance” and issued regulations shortening the maximum coverage period under federal law for STLD policies from less than 12 months to less than three months and prescribing a disclosure that must be provided to new applicants. The intent of the regulation was to limit sale of these policies to situations involving a short gap in coverage and to discourage their use a substitute for primary health insurance coverage. The rule took effect for policies issued to individuals on or after January 1, 2017. In February 2018, the Trump Administration issued a new proposed regulation to reinstate the “less than 12 months” maximum coverage term for STLD policies. The preamble to the proposed regulation specified that this would provide more affordable consumer choice for health coverage. For more information about STLD policies, see this issue brief.
Extending the coverage period for STLD policies back to just under a year is likely to make them a more attractive choice for healthier individuals concerned about the cost of ACA-compliant plans. This is particularly true beginning in 2019 when the individual mandate penalty ends and purchasers will no longer need to pay a penalty in addition to the premiums for these policies.
Under the ACA framework, STLD plans may provide a lower-cost alternative source of health coverage for people in good health. With ACA policies as a backup, people who purchase STLD policies and develop a health problem would not be able to renew their short-term policy at the end of its term, but would be able to elect an ACA-compliant plan during the next open enrollment.
It is possible, as one estimate concluded, that more healthy individual market participants may switch to short-term policies as a result. Such “adverse selection” would raise the average cost of covering remaining individuals in ACA-compliant plans, leading to further premium increases in those policies. For people with pre-existing conditions who do not qualify for subsidies, the rising cost of ACA-compliant coverage could challenge affordability, especially for people with pre-existing conditions who have incomes that make them ineligible for premium subsidies.
Association Health Plans
Another draft regulation proposed by the Trump Administration would permit small employers and self-employed individuals to buy a new type of association health plan coverage that does not have to meet all requirements applicable to other ACA-compliant small group and non-group health plans. While many types of health insurance are marketed though associations, including STLDs, hospital indemnity plans and cancer or other dread disease policies, current policy discussions about AHPs tend to focus on arrangements formed by groups of employers (called multiple employer welfare arrangements, or MEWAs) which could also offer group health insurance coverage to self-employed people without any employees (“sole proprietors”).
The U.S. Department of Labor recently proposed regulations under the Employee Retirement Income Security Act (ERISA) to expand the types of MEWAs that could offer health plans that would not be subject to certain ACA requirements. Under the draft regulation, AHPs – a type of MEWA – could offer health coverage to sole proprietors and to small businesses, but would be subject to large group health plan standards. Key ACA requirements for the non-group and small group market do not apply to large group health plans today, and so would not apply to AHP coverage sold to self-employed individuals or small employers. In particular, AHPs would not be required to cover essential health benefits; it would be possible under the proposed regulation for AHPs to offer policies that do not cover prescription drugs, for example.
Under the draft regulation, AHPs would be subject to a nondiscrimination standard that would prohibit basing eligibility or premiums on an enrollee’s health status. However, other ACA rating standards in the non-group and small group market would not apply; in particular, AHPs would be allowed to vary premiums by more than 3:1 for age and without limit based on gender, geography, and other factors such type of industry or occupation.
As a result, AHPs could provide self-employed individuals an alternative to individual health insurance that provides fewer benefits with more rating flexibility. As nearly one-third (31%) of individual market enrollees are self-employed, the impact of AHPs could be significant.
The draft regulation included other language related to state vs. federal regulatory authority over MEWAs, or AHPs. Currently, MEWAs are subject to a somewhat complex mix of regulatory provisions at the federal and state levels; the applicable standards vary depending on a number of things, including whether the MEWA is self-funded or provides benefits through insurance, whether the arrangement itself is considered to be sponsoring an employee benefit plan as defined in ERISA, the sizes of the employers participating in the arrangement, and how the states in which the arrangements operate approach MEWA regulation. The proposed rule generally leaves in place state authority over MEWAs/AHPs. However, the DOL requested comments on whether it should consider changes that would limit state regulation of self-funded AHPs to financial matters such as solvency and reserves, in effect, prohibiting states from regulating AHP rating and benefit design practices.
The degree of impact on individual health insurance markets will depend in part on the final rules, in particular whether the nondiscrimination provision is preserved and whether states retain current authority over AHPs.
Idaho Proposal for New State-Based Health Plans
In January 2018, pursuant to an executive order by Governor Otter, the Idaho Department of Insurance issued a bulletin outlining provisions of new individual health insurance products that insurance companies would be permitted to sell under state law. The new “State-Based Health Benefit Plans” would not have to comply with certain ACA requirements and, as a result, would likely be offered for premiums lower than those charged for ACA-compliant policies – at least for consumers who are younger and who don’t have pre-existing conditions.
State-Based Health Plans would be required to cover a package of health benefits and cost sharing that was less than that required for ACA-compliant plans. For example, certain essential health benefit categories, such as habilitation services and pediatric dental and vision, appear not to be required. In addition, ACA limits on cost sharing were not specified, and annual dollar limits on covered benefits could be applied. If consumers reach the annual dollar limit on coverage under a state-based plan, the insurer would be required to transfer their enrollment into an ACA-compliant plan.
In addition, state-based plans would not be allowed to deny applicants based on health status and could be sold year round, outside of Open Enrollment. However, State-Based plans could exclude coverage of pre-existing conditions for any individual who had experienced at least a 63-day break in coverage. These plans would also be permitted to vary premiums by a factor of 3:1 based on health status (prohibited by the ACA), and by 5:1 based on age (higher than the 3:1 ratio permitted by the ACA). In order to offer a State-Based Health Plan, insurers would also be required to offer at least one QHP through the Idaho Marketplace.
The bulletin required that state-based plans and exchange-certified plans must comprise a single risk pool, with a single index rate for all plans that does not account for differences in the health status of individuals who enroll, or are expected to enroll in a particular type of plan. However, the Academy of Actuaries noted that, because the two types of plans would not be competing under the same rules, “there would be, in effect, two risk pools – one for ACA coverage and one for state-based coverage. Premiums for ACA coverage would increase, threatening sustainability of the ACA market and its pre-existing condition protections.”
The Idaho State-Based Health Plan proposal is similar in many respects to an amendment offered by Senator Ted Cruz during the ACA repeal debate in 2017. The amendment, which was not enacted, would have allowed insurers that sell ACA-compliant marketplace plans to also offer other policies that could be medically underwritten and that would not have to meet other ACA standards. Although CBO did not estimate how the amendment would impact premiums or coverage, representatives of the insurance industry predicted that, “As healthy people move to the less-regulated plans, those with significant medical needs will have no choice but to stay in the comprehensive plans, and premiums will skyrocket for people with preexisting conditions. This would especially impact middle-income families that that are not eligible for a tax credit.”
The Idaho proposal appears to be not moving forward at this time. Recently, the director of the federal Center on Medicare and Medicaid Services (CMS) advised Idaho officials that these State-Based health plans would be in violation of federal law. Under the ACA, states do not have flexibility to authorize the sale of individual health insurance policies that do not meet federal minimum standards. In states that do not enforce federal minimum standards, the federal government is required to step in and enforce.
The CMS letter did generally express sympathy with Idaho’s approach, citing “damage caused by the [ACA],” and encouraged the state to pursue modified strategies to expand availability of more affordable plans that do not meet all ACA requirements. The letter specifically urged Idaho to consider promoting short-term policies as a legal alternative to ACA-compliant health plans, and it invited the State to develop other alternative strategies using ACA state waiver authority.
Farm Bureau Health Plans Exempt from State Regulation
A new Iowa law enacted this month would permit the sale of health coverage by the state’s Farm Bureau. The Farm Bureau is not a licensed health insurer. Under the new law, Farm Bureau health plans would be deemed to not be insurance and explicitly would not be subject to state insurance regulation. By extension, Farm Bureau plans also would not have to meet federal ACA standards for health insurance as these apply only to policies sold by state licensed health insurers.
The new Iowa law applies no other standards for Farm Bureau health plans – for example, it does not establish minimum benefit requirements, rating requirements, or rules prohibiting discrimination based on pre-existing health conditions. Appeal rights guaranteed to health insurance policyholders also would not apply to Farm Bureau enrollees, nor would state insurance solvency and other financial regulations. The law does require the Farm Bureau to administer coverage through a state licensed third party administrator, or TPA (expected to be Wellmark, Iowa’s Blue Cross Blue Shield insurer.) However, use of a TPA does not extend federal or state insurance law to the underlying Farm Bureau health plan.
The Iowa law closely resembles a Tennessee state law, enacted in 1993, which authorized the sale of health coverage by the Farm Bureau and deemed such coverage not to be health insurance subject to state regulation. In Tennessee, it has been reported that roughly 25,000 residents purchase non-group Farm Bureau health plans that are medically underwritten. (By comparison, more than 228,000 residents have ACA-compliant individual policies through the Marketplace this year.) Farm Bureau plan premiums can be as much as two-thirds lower than for ACA-compliant plans because the underwritten policies can and do deny coverage to people with pre-existing conditions. Adverse selection results, with sicker residents confined to the ACA-regulated market. An analysis of risk scores for state insurance markets finds that Tennessee’s individual market has one of the highest risk scores in the nation.
Since 2014, Tennessee residents who buy underwritten Farm Bureau health coverage are not considered to have “minimum essential coverage” and so may owe a tax penalty under the ACA individual mandate. However, this disincentive to purchase Farm Bureau plans in Tennessee and Iowa will end in 2019 when repeal of the mandate penalty takes effect.
Discussion
Each of these proposals follows a similar theme. Creating parallel insurance markets with different, lesser consumer protections, allows insurers to offer lower premiums and less coverage to people while they are healthy, leaving the ACA-regulated market with a sicker pool and higher premiums. Once repeal of the ACA individual mandate penalty takes effect in 2019, the net cost differential between regulated and less-regulated coverage will be even greater.
Premium subsidies in the ACA-regulated market will help to curb adverse selection, protecting people with lower incomes from the impact of higher premiums, and providing some continued stability in the reformed market. However, middle-income people who are not eligible for subsidies, and who have pre-existing conditions, will not have any meaningful new coverage choices under these proposals. Instead, the cost of health insurance that covers essential benefits and their pre-existing conditions will increase, potentially further pricing them out of affordable coverage altogether.
Source:
Pollitz K. (18 April 2018). "Proposals for Insurance Options That Don’t Comply with ACA Rules: Trade-offs In Cost and Regulation" [web blog post]. Retrieved from address https://kaiserf.am/2w89S3Z
Individual Insurance Market Performance in Late 2017
In this article from the Kaiser Family Foundation, we will take a look at the individual insurance market performance as of late 2017. This is a great article for employers to get the low down on how to understand and read performance charts, as well as prepare for any instability in the next quarter.
Concerns about the stability of the individual insurance market under the Affordable Care Act (ACA) have been raised in the past year following exits of several insurers from the exchange markets, and again with renewed intensity in recent months during the debate over repeal of the health law. Our earlier analysis of first quarter financial data from 2011-2017 found that insurer financial performance indeed worsened in 2014 and 2015 with the opening of the exchange markets, but showed signs of improving in 2016 and stabilizing in 2017 as insurers began to regain profitability.
In this brief, we look at recently-released third quarter financial data from 2017 to examine whether recent premium increases were sufficient to bring insurer performance back to pre-ACA levels. These new data from the first nine months of 2017 offer further evidence that the individual market has been stabilizing and insurers are regaining profitability, even as political and policy uncertainty and the repeal of the individual mandatepenalty as part of tax reform legislation cloud expectations for 2018 and beyond.
Third quarter financial data reflects insurer performance in 2017 through September, before the Administration ceased payments for cost-sharing subsidies effective October 12, 2017. The loss of these payments during the fourth quarter of 2017 will diminish insurer profits, but nonetheless, insurers are likely to see better financial results in 2017 than they did in earlier years of the ACA Marketplaces.
We use financial data reported by insurance companies to the National Association of Insurance Commissioners and compiled by Mark Farrah Associates to look at the average premiums, claims, medical loss ratios, gross margins, and enrollee utilization from third quarter 2011 through third quarter 2017 in the individual insurance market.1 Third quarter data is year-to-date from January 1 – September 30. These figures include coverage purchased through the ACA’s exchange marketplaces and ACA-compliant plans purchased directly from insurers outside the marketplaces (which are part of the same risk pool), as well as individual plans originally purchased before the ACA went into effect.
Medical Loss Ratios
As we found in our previous analysis, insurer financial performance as measured by loss ratios (the share of health premiums paid out as claims) worsened in the earliest years of the Affordable Care Act Marketplaces, but began to improve more recently. This is to be expected, as the market had just undergone significant regulatory changes in 2014 and insurers had very little information to work with in setting their premiums, even going into the second year of the exchange markets.
Loss ratios began to decline in 2016, suggesting improved financial performance. In 2017, following relatively large premium increases, individual market insurers saw significant improvement in loss ratios, averaging 81% through the third quarter. Third quarter loss ratios tend to follow the same pattern as annual loss ratios, but in recent years have been lower than annual loss ratios.2 Though 2017 annual loss ratios are likely to be impacted by the loss of cost-sharing subsidy payments during the last three months of the year, this is nevertheless a sign that individual market insurers on average were beginning to stabilize in 2017.
Margins
Another way to look at individual market financial performance is to examine average gross margins per member per month, or the average amount by which premium income exceeds claims costs per enrollee in a given month. Gross margins are an indicator of performance, but positive margins do not necessarily translate into profitability since they do not account for administrative expenses. As with medical loss ratios, third quarter margins tend to follow a similar pattern to annual margins, but generally look more favorable as enrollees are still paying toward their deductibles in the early part of the year, lowering claims costs for insurers.
Looking at gross margins, we see a similar pattern as we did looking at loss ratios, where insurer financial performance improved dramatically through the third quarter of 2017 (increasing to $79 per enrollee, from a recent third quarter low of $10 in 2015). Again, third quarter data tend to indicate the general direction of the annual trend, and while annual 2017 margins are unlikely to end as high as they are in the third quarter, these data suggest that insurers in this market are on track to reach pre-ACA individual market performance levels.
Underlying Trends
Driving recent improvements in individual market insurer financial performance are the premium increases in 2017 and simultaneous slow growth in claims for medical expenses. On average, premiums per enrollee grew 17% from third quarter 2016 to third quarter 2017, while per person claims grew only 4%.
Figure 3: Average Third Quarter Individual Market Monthly Premiums and Claims Per Person, 2011 – 2017
One concern about rising premiums in the individual market was whether healthy enrollees would drop out of the market in large numbers rather than pay higher rates. While the vast majority of exchange enrollees are subsidized and sheltered from paying premium increases, those enrolling off-exchange would have to pay the full increase. As average claims costs grew very slowly through the third quarter of 2017, it does not appear that the enrollees today are noticeably sicker than last year.
On average, the number of days individual market enrollees spent in a hospital through the third quarter of 2017 was similar to third quarter inpatient days in the previous two years. (The third quarter of 2014 is not necessarily representative of the full year because open enrollment was longer that year and a number of exchange enrollees did not begin their coverage until mid-year 2014).
Figure 4: Average Third Quarter Individual Market Monthly Hospital Patient Days Per 1,000 Enrollees, 2011 – 2017
Taken together, these data on claims and utilization suggest that the individual market risk pool is relatively stable, though sicker on average than the pre-ACA market, which is to be expected since people with pre-existing conditions have guaranteed access to coverage under the ACA.
Discussion
Third quarter results from 2017 suggest the individual market was stabilizing and insurers in this market were regaining profitability. Insurer financial results as of the third quarter 2017 – before the Administration’s decision to stop making cost-sharing subsidy payments and before the repeal of the individual mandate penalty in the tax overhaul – showed no sign of a market collapse. Third quarter premium and claims data from 2017 support the notion that 2017 premium increases were necessary as a one-time market correction to adjust for a sicker-than-expected risk pool. Although individual market enrollees appear on average to be sicker than the market pre-ACA, data on hospitalizations in this market suggest that the risk pool is stable on average and not getting progressively sicker as of late 2017. Some insurers have exited the market in recent years, but others have been successful and expanded their footprints, as would be expected in a competitive marketplace.
While the market on average is stabilizing, there remain some areas of the country that are more fragile. In addition, policy uncertainty has the potential to destabilize the individual market generally. The decision by the Administration to cease cost-sharing subsidy payments led some insurers to leave the market or request larger premium increases than they would otherwise. A few parts of the country were thought to be at risk of having no insurer on exchange, though new entrants or expanding insurers have since moved in to cover all areas previously at risk of being bare. Signups through the federal marketplace during the recently completed open enrollment period were higher than many expected, which could help to keep the market stable. However, continued policy uncertainty and the repeal of the individual mandate as part of tax reform legislation complicate the outlook for 2018 and beyond.
Methods
We analyzed insurer-reported financial data from Health Coverage Portal TM, a market database maintained by Mark Farrah Associates, which includes information from the National Association of Insurance Commissioners. The dataset analyzed in this report does not include NAIC plans licensed as life insurance or California HMOs regulated by California’s Department of Managed Health Care; in total, the plans in this dataset represent at least 80% of the individual market. All figures in this data note are for the individual health insurance market as a whole, which includes major medical insurance plans sold both on and off exchange. We excluded some plans that filed negative enrollment, premiums, or claims and corrected for plans that did not file “member months” in the third quarter but did file third quarter membership.
To calculate the weighted average loss ratio across the individual market, we divided the market-wide sum of total incurred claims by the sum of all health premiums earned. Medical loss ratios in this analysis are simple loss ratios and do not adjust for quality improvement expenses, taxes, or risk program payments. Gross margins were calculated by subtracting the sum of total incurred claims from the sum of health premiums earned and dividing by the total number of member months (average monthly enrollment) in the individual insurance market.
Source:
Cox C., Semanskee A., Levitt L. (4 January 2018). "Individual Insurance Market Performance in Late 2017" [web blog post]. Retrieved from address https://www.kff.org/health-reform/issue-brief/individual-insurance-market-performance-in-late-2017/
The Effects of Ending the Affordable Care Act’s Cost-Sharing Reduction Payments
Controversy has emerged recently over federal payments to insurers under the Affordable Care Act (ACA) related to cost-sharing reductions for low-income enrollees in the ACA’s marketplaces.
The ACA requires insurers to offer plans with reduced patient cost-sharing (e.g., deductibles and copays) to marketplace enrollees with incomes 100-250% of the poverty level. The reduced cost-sharing is only available in silver-level plans, and the premiums are the same as standard silver plans.
To compensate for the added cost to insurers of the reduced cost-sharing, the federal governments makes payments directly to insurance companies. The Congressional Budget Office (CBO) estimates the cost of these payments at $7 billion in fiscal year 2017, rising to $10 billion in 2018 and $16 billion by 2027.
The U.S. House of Representatives sued the Secretary of the U.S. Department of Health and Human Services under the Obama Administration, challenging the legality of making the cost-sharing reduction (CSR) payments without an explicit appropriation. A district court judge has ruled in favor of the House, but the ruling was appealed by the Secretary and the payments were permitted to continue pending the appeal. The case is currently in abeyance, with status reports required every three months, starting May 22, 2017.
If the CSR payments end – either through a court order or through a unilateral decision by the Trump Administration, assuming the payments are not explicitly authorized in an appropriation by Congress – insurers would face significant revenue shortfalls this year and next.
Many insurers might react to the end of subsidy payments by exiting the ACA marketplaces. If insurers choose to remain in the marketplaces, they would need to raise premiums to offset the loss of the payments.
We have previously estimated that insurers would need to raise silver premiums by about 19% on average to compensate for the loss of CSR payments. Our assumption is that insurers would only increase silver premiums (if allowed to do so by regulators), since those are the only plans where cost-sharing reductions are available. The premium increases would be higher in states that have not expanded Medicaid (and lower in states that have), since there are a large number of marketplace enrollees in those states with incomes 100-138% of poverty who qualify for the largest cost-sharing reductions.
There would be a significant amount of uncertainty for insurers in setting premiums to offset the cost of cost-sharing reductions. For example, they would need to anticipate what share of enrollees in silver plans would be receiving reduced cost-sharing and at what level. Under a worst case scenario – where only people eligible for sharing reductions enrolled in silver plans – the required premium increase would be higher than 19%, and many insurers might request bigger rate hikes.
Figure 1: How much silver premiums would have to rise to compensate for loss of cost-sharing reduction payments
While the federal government would save money by not making CSR payments, it would face increased costs for tax credits that subsidize premiums for marketplace enrollees with incomes 100-400% of the poverty level.
The ACA’s premium tax credits are based on the premium for a benchmark plan in each area: the second-lowest-cost silver plan in the marketplace. The tax credit is calculated as the difference between the premium for that benchmark plan and a premium cap calculated as a percent of the enrollee’s household income (ranging from 2.04% at 100% of the poverty level to 9.69% at 400% of the poverty in 2017).
Any systematic increase in premiums for silver marketplace plans (including the benchmark plan) would increase the size of premium tax credits. The increased tax credits would completely cover the increased premium for subsidized enrollees covered through the benchmark plan and cushion the effect for enrollees signed up for more expensive silver plans. Enrollees who apply their tax credits to other tiers of plans (i.e., bronze, gold, and platinum) would also receive increased premium tax credits even though they do not qualify for reduced cost-sharing and the underlying premiums in their plans might not increase at all.
We estimate that the increased cost to the federal government of higher premium tax credits would actually be 23% more than the savings from eliminating cost-sharing reduction payments. For fiscal year 2018, that would result in a net increase in federal costs of $2.3 billion. Extrapolating to the 10-year budget window (2018-2027) using CBO’s projection of CSR payments, the federal government would end up spending $31 billion more if the payments end.
This assumes that insurers would be willing to stay in the market if CSR payments are eliminated.
Figure 2: How eliminating ACA cost-sharing reduction payments increases federal costs (2018)
Methods
We previously estimated that the increase in silver premiums necessary to offset the elimination of CSR payments would be 19%.
To estimate the average increase in premium tax credits per enrollee, we applied that premium increase to the average premium for the second-lowest-cost silver plan in 2017. The Department of Health and Human Services reports that the average monthly premium for the lowest-cost silver plan in 2017 is $433. Our analysis of premium data shows that the second-lowest-cost silver plan has a premium 4% higher than average than the lowest-cost silver plan.
We applied our estimate of the average premium tax credit increase to the estimated total number of people receiving tax credits in 2017. This is based on the 10.1 million people who selected a plan during open enrollment and qualified for a tax credit, reduced by about 17% to reflect the difference between reported plan selections in 2016 and effectuated enrollment in June of 2016.
We believe the resulting 23% increase in federal costs is an underestimate. To the extent some people not receiving cost-sharing reductions migrate out of silver plans, the required premium increase to offset the loss of CSR payments would be higher. Selective exits by insurers (e.g., among those offering lower cost plans) could also drive benchmark premiums higher. In addition, higher silver premiums would somewhat increase the number of people receiving tax credits because currently some younger/higher-income people with incomes under 400% of the poverty level receive a tax credit of zero because their premium cap is lower than the premium for the second-lowest-cost silver plan. We have not accounted for any of these factors.
Our analysis produces results similar to recent estimates for California by Covered California and a January 2016 analysis from the Urban Institute.
An Early Look at 2018 Premium Changes and Insurer Participation on ACA Exchanges
Each year insurers submit filings to state regulators detailing their plans to participate on the Affordable Care Act marketplaces (also called exchanges). These filings include information on the premiums insurers plan to charge in the coming year and which areas they plan to serve. Each state or the federal government reviews premiums to ensure they are accurate and justifiable before the rate goes into effect, though regulators have varying types of authority and states make varying amounts of information public.
In this analysis, we look at preliminary premiums and insurer participation in the 20 states and the District of Columbia where publicly available rate filings include enough detail to be able to show the premium for a specific enrollee. As in previous years, we focus on the second-lowest cost silver plan in the major city in each state. This plan serves as the benchmark for premium tax credits. Enrollees must also enroll in a silver plan to obtain reduced cost sharing tied to their incomes. About 71% of marketplace enrollees are in silver plans this year.
States are still reviewing premiums and participation, so the data in this report are preliminary and could very well change. Rates and participation are not locked in until late summer or early fall (insurers must sign an annual contract by September 27 in states using Healthcare.gov).
Insurers in this market face new uncertainty in the current political environment and in some cases have factored this into their premium increases for the coming year. Specifically, insurers have been unsure whether the individual mandate (which brings down premiums by compelling healthy people to buy coverage) will be repealed by Congress or to what degree it will be enforced by the Trump Administration. Additionally, insurers in this market do not know whether the Trump Administration will continue to make payments to compensate insurers for cost-sharing reductions (CSRs), which are the subject of a lawsuit, or whether Congress will appropriate these funds. (More on these subsidies can be found here).
The vast majority of insurers included in this analysis cite uncertainty surrounding the individual mandate and/or cost sharing subsidies as a factor in their 2018 rates filings. Some insurers explicitly factor this uncertainty into their initial premium requests, while other companies say if they do not receive more clarity or if cost-sharing payments stop, they plan to either refile with higher premiums or withdraw from the market. We include a table in this analysis highlighting examples of companies that have factored this uncertainty into their initial premium increases and specified the amount by which the uncertainty is increasing rates.
Changes in the Second-Lowest Cost Silver Premium
The second-lowest silver plan is one of the most popular plan choices on the marketplace and is also the benchmark that is used to determine the amount of financial assistance individuals and families receive. The table below shows these premiums for a major city in each state with available data. (Our analyses from 2017, 2016, 2015, and 2014 examined changes in premiums and participation in these states and major cities since the exchange markets opened nearly four years ago.)
Across these 21 major cities, based on preliminary 2018 rate filings, the second-lowest silver premium for a 40-year-old non-smoker will range from $244 in Detroit, MI to $631 in Wilmington, DE, before accounting for the tax credit that most enrollees in this market receive.
Of these major cities, the steepest proposed increases in the unsubsidized second-lowest silver plan are in Wilmington, DE (up 49% from $423 to $631 per month for a 40-year-old non-smoker), Albuquerque, NM (up 34% from $258 to $346), and Richmond, VA (up 33% from $296 to $394). Meanwhile, unsubsidized premiums for the second-lowest silver premiums will decrease in Providence, RI (down -5% from $261 to $248 for a 40-year-old non-smoker) and remain essentially unchanged in Burlington, VT ($492 to $491).
As discussed in more detail below, this year’s preliminary rate requests are subject to much more uncertainty than in past years. An additional factor driving rates this year is the return of the ACA’s health insurance tax, which adds an estimated 2 to 3 percentage points to premiums.
Most enrollees in the marketplaces (84%) receive a tax credit to lower their premium and these enrollees will be protected from premium increases, though they may need to switch plans in order to take full advantage of the tax credit. The premium tax credit caps how much a person or family must spend on the benchmark plan in their area at a certain percentage of their income. For this reason, in 2017, a single adult making $30,000 per year would pay about $207 per month for the second-lowest-silver plan, regardless of the sticker price (unless their unsubsidized premium was less than $207 per month). If this person enrolls in the second lowest-cost silver plan is in 2018 as well, he or she will pay slightly less (the after-tax credit payment for a similar person in 2018 will be $201 per month, or a decrease of 2.9%). Enrollees can use their tax credits in any marketplace plan. So, because tax credits rise with the increase in benchmark premiums, enrollees are cushioned from the effect of premium hikes.
| Table 1: Monthly Silver Premiums and Financial Assistance for a 40 Year Old Non-Smoker Making $30,000 / Year | ||||||||||
| State | Major City | 2nd Lowest Cost Silver Before Tax Credit |
2nd Lowest Cost Silver After Tax Credit |
Amount of Premium Tax Credit | ||||||
| 2017 | 2018 | % Change from 2017 |
2017 | 2018 | % Change from 2017 |
2017 | 2018 | % Change from 2017 |
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| California* | Los Angeles | $258 | $289 | 12% | $207 | $201 | -3% | $51 | $88 | 71% |
| Colorado | Denver | $313 | $352 | 12% | $207 | $201 | -3% | $106 | $150 | 42% |
| Connecticut | Hartford | $369 | $417 | 13% | $207 | $201 | -3% | $162 | $216 | 33% |
| DC | Washington | $298 | $324 | 9% | $207 | $201 | -3% | $91 | $122 | 35% |
| Delaware | Wilmington | $423 | $631 | 49% | $207 | $201 | -3% | $216 | $430 | 99% |
| Georgia | Atlanta | $286 | $308 | 7% | $207 | $201 | -3% | $79 | $106 | 34% |
| Idaho | Boise | $348 | $442 | 27% | $207 | $201 | -3% | $141 | $241 | 70% |
| Indiana | Indianapolis | $286 | $337 | 18% | $207 | $201 | -3% | $79 | $135 | 72% |
| Maine | Portland | $341 | $397 | 17% | $207 | $201 | -3% | $134 | $196 | 46% |
| Maryland | Baltimore | $313 | $392 | 25% | $207 | $201 | -3% | $106 | $191 | 81% |
| Michigan* | Detroit | $237 | $244 | 3% | $207 | $201 | -3% | $29 | $42 | 44% |
| Minnesota** | Minneapolis | $366 | $383 | 5% | $207 | $201 | -3% | $159 | $181 | 14% |
| New Mexico | Albuquerque | $258 | $346 | 34% | $207 | $201 | -3% | $51 | $144 | 183% |
| New York*** | New York City | $456 | $504 | 10% | $207 | $201 | -3% | $249 | $303 | 21% |
| Oregon | Portland | $312 | $350 | 12% | $207 | $201 | -3% | $105 | $149 | 42% |
| Pennsylvania | Philadelphia | $418 | $515 | 23% | $207 | $201 | -3% | $211 | $313 | 49% |
| Rhode Island | Providence | $261 | $248 | -5% | $207 | $201 | -3% | $54 | $47 | -13% |
| Tennessee | Nashville | $419 | $507 | 21% | $207 | $201 | -3% | $212 | $306 | 44% |
| Vermont | Burlington | $492 | $491 | 0% | $207 | $201 | -3% | $285 | $289 | 2% |
| Virginia | Richmond | $296 | $394 | 33% | $207 | $201 | -3% | $89 | $193 | 117% |
| Washington | Seattle | $238 | $306 | 29% | $207 | $201 | -3% | $31 | $105 | 239% |
| NOTES: *The 2018 premiums for MI and CA reflect the assumption that CSR payments will continue. **The 2018 premium for MN assumes no reinsurance. ***Empire has filed to offer on the individual market in New York in 2018 but has not made its rates public. SOURCE: Kaiser Family Foundation analysis of premium data from Healthcare.gov and insurer rate filings to state regulators. |
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Looking back to 2014, when changes to the individual insurance market under the ACA first took effect, reveals a wide range of premium changes. In many of these cities, average annual premium growth over the 2014-2018 period has been modest, and in two cites (Indianapolis and Providence), benchmark premiums have actually decreased. In other cities, premiums have risen rapidly over the period, though in some cases this rapid growth was because premiums were initially quite low (e.g., in Nashville and Minneapolis).
| Table 2: Monthly Benchmark Silver Premiums for a 40 Year Old Non-Smoker, 2014-2018 |
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| State | Major City | 2014 | 2015 | 2016 | 2017 | 2018 | Average Annual % Change from 2014 to 2018 | Average Annual % Change After Tax Credit, $30K Income |
| California | Los Angeles | $255 | $257 | $245 | $258 | $289 | 3% | -1% |
| Colorado | Denver | $250 | $211 | $278 | $313 | $352 | 9% | -1% |
| Connecticut | Hartford | $328 | $312 | $318 | $369 | $417 | 6% | -1% |
| DC | Washington | $242 | $242 | $244 | $298 | $324 | 8% | -1% |
| Delaware | Wilmington | $289 | $301 | $356 | $423 | $631 | 22% | -1% |
| Georgia | Atlanta | $250 | $255 | $254 | $286 | $308 | 5% | -1% |
| Idaho | Boise | $231 | $210 | $273 | $348 | $442 | 18% | -1% |
| Indiana | Indianapolis | $341 | $329 | $298 | $286 | $337 | 0% | -1% |
| Maine | Portland | $295 | $282 | $288 | $341 | $397 | 8% | -1% |
| Maryland | Baltimore | $228 | $235 | $249 | $313 | $392 | 15% | -1% |
| Michigan* | Detroit | $224 | $230 | $226 | $237 | $244 | 2% | -1% |
| Minnesota** | Minneapolis | $162 | $183 | $235 | $366 | $383 | 24% | 6% |
| New Mexico | Albuquerque | $194 | $171 | $186 | $258 | $346 | 16% | 1% |
| New York*** | New York City | $365 | $372 | $369 | $456 | $504 | 8% | -1% |
| Oregon | Portland | $213 | $213 | $261 | $312 | $350 | 13% | -1% |
| Pennsylvania | Philadelphia | $300 | $268 | $276 | $418 | $515 | 14% | -1% |
| Rhode Island | Providence | $293 | $260 | $263 | $261 | $248 | -4% | -1% |
| Tennessee | Nashville | $188 | $203 | $281 | $419 | $507 | 28% | 2% |
| Vermont | Burlington | $413 | $436 | $468 | $492 | $491 | 4% | -1% |
| Virginia | Richmond | $253 | $260 | $276 | $296 | $394 | 12% | -1% |
| Washington | Seattle | $281 | $254 | $227 | $238 | $306 | 2% | -1% |
| NOTES: *The 2018 premiums for MI and CA reflect the assumption that CSR payments will continue. **The 2018 premium for MN assumes no reinsurance. ***Empire has filed to offer on the individual market in New York in 2018 but has not made its rates public. SOURCE: Kaiser Family Foundation analysis of premium data from Healthcare.gov and insurer rate filings to state regulators. |
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Changes in Insurer Participation
Across these 20 states and DC, an average of 4.6 insurers have indicated they intend to participate in 2018, compared to an average of 5.1 insurers per state in 2017, 6.2 in 2016, 6.7 in 2015, and 5.7 in 2014. In states using Healthcare.gov, insurers have until September 27 to sign final contracts to participate in 2018. Insurers often do not serve an entire state, so the number of choices available to consumers in a particular area will typically be less than these figures.
| Table 3: Total Number of Insurers by State, 2014 – 2018 | |||||
| State | Total Number of Issuers in the Marketplace | ||||
| 2014 | 2015 | 2016 | 2017 | 2018 (Preliminary) | |
| California | 11 | 10 | 12 | 11 | 11 |
| Colorado | 10 | 10 | 8 | 7 | 7 |
| Connecticut | 3 | 4 | 4 | 2 | 2 |
| DC | 3 | 3 | 2 | 2 | 2 |
| Delaware | 2 | 2 | 2 | 2 | 1 (Aetna exiting) |
| Georgia | 5 | 9 | 8 | 5 | 4 (Humana exiting) |
| Idaho | 4 | 5 | 5 | 5 | 4 (Cambia exiting) |
| Indiana | 4 | 8 | 7 | 4 | 2 (Anthem and MDwise exiting) |
| Maine | 2 | 3 | 3 | 3 | 3 |
| Maryland | 4 | 5 | 5 | 3 | 3 (Cigna exiting, Evergreen1 filed to reenter) |
| Michigan | 9 | 13 | 11 | 9 | 8 (Humana exiting) |
| Minnesota | 5 | 4 | 4 | 4 | 4 |
| New Mexico | 4 | 5 | 4 | 4 | 4 |
| New York | 16 | 16 | 15 | 14 | 14 |
| Oregon | 11 | 10 | 10 | 6 | 5 (Atrio exiting) |
| Pennsylvania | 7 | 8 | 7 | 5 | 5 |
| Rhode Island | 2 | 3 | 3 | 2 | 2 |
| Tennessee | 4 | 5 | 4 | 3 | 3 (Humana exiting, Oscar entering) |
| Vermont | 2 | 2 | 2 | 2 | 2 |
| Virginia | 5 | 6 | 7 | 8 | 6 (UnitedHealthcare and Aetna exiting) |
| Washington | 7 | 9 | 8 | 6 | 5 (Community Health Plan of WA exiting) |
| Average (20 states + DC) | 5.7 | 6.7 | 6.2 | 5.1 | 4.6 |
| NOTES: Insurers are grouped by parent company or group affiliation, which we obtained from HHS Medical Loss Ratio public use files and supplemented with additional research. 1The number of preliminary 2018 insurers in Maryland includes Evergreen, which submitted a filing but has been placed in receivership. SOURCE: Kaiser Family Foundation analysis of premium data from Healthcare.gov and insurer rate filings to state regulators. |
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Uncertainty Surrounding ACA Provisions
Insurers in the individual market must submit filings with their premiums and service areas to states and/or the federal government for review well in advance of these rates going into effect. States vary in their deadlines and processes, but generally, insurers were required to submit their initial rate requests in May or June of 2017 for products that go into effect in January 2018. Once insurers set their premiums for 2018 and sign final contacts at the end of September, those premiums are locked in for the entire calendar year and insurers do not have an opportunity to revise their rates or service areas until the following year.
Meanwhile, over the course of this summer, the debate in Congress over repealing and replacing the Affordable Care Act has carried on as insurers set their rates for next year. Both the House and Senate bills included provisions that would have made significant changes to the law effective in 2018 or even retroactively, including repeal of the individual mandate penalty. Additionally, the Trump administration has sent mixed signals over whether it would continue to enforce the individual mandate or make payments to insurers to reimburse them for the cost of providing legally required cost-sharing assistance to low-income enrollees.
Because this policy uncertainty is far outside the norm, insurers are making varying assumptions about how this uncertainty will play out and affect premiums. Some states have attempted to standardize the process by requesting rate submissions under multiple scenarios, while other states appear to have left the decision up to each individual company. There is no standard place in the filings where insurers across all states can explain this type of assumption, and some states do not post complete filings to allow the public to examine which assumptions insurers are making.
In the 20 states and DC with detailed rate filings included in the previous sections of this analysis, the vast majority of insurers cite policy uncertainty in their rate filings. Some insurers make an explicit assumption about the individual mandate not being enforced or cost-sharing subsidies not being paid and specify how much each assumption contributes to the overall rate increase. Other insurers state that if they do not get clarity by the time final rates must be submitted – which has now been delayed to September 5 for the federal marketplace – they may either increase their premiums further or withdraw from the market.
Table 4 highlights examples of insurers that have explicitly factored into their premiums an assumption that either the individual mandate will not be enforced or cost-sharing subsidy payments will not be made and have specified the degree to which that assumption is influencing their initial rate request. As mentioned above, the vast majority of companies in states with detailed rate filings have included some language around the uncertainty, so it is likely that more companies will revise their premiums to reflect uncertainty in the absence of clear answers from Congress or the Administration.
Insurers assuming the individual mandate will not be enforced have factored in to their rate increases an additional 1.2% to 20%. Those assuming cost-sharing subsidy payments will not continue and factoring this into their initial rate requests have applied an additional rate increase ranging from 2% to 23%. Because cost-sharing reductions are only available in silver plans, insurers may seek to raise premiums just in those plans if the payments end. We estimate that silver premiums would have to increase by 19% on average to compensate for the loss of CSR payments, with the amount varying substantially by state.
Several insurers assumed in their initial rate filing that payment of the cost-sharing subsidies would continue, but indicated the degree to which rates would increase if they are discontinued. These insurers are not included in the Table 4. If CSR payments end or there is continued uncertainty, these insurers say they would raise their rates an additional 3% to 10% beyond their initial request – or ranging from 9% to 38% in cases when the rate increases would only apply to silver plans. Some states have instructed insurers to submit two sets of rates to account for the possibility of discontinued cost-sharing subsidies. In California, for example, a surcharge would be added to silver plans on the exchange, increasing proposed rates an additional 12.4% on average across all 11 carriers, ranging from 8% to 27%.
| Table 4: Examples of Preliminary Insurer Assumptions Regarding Individual Mandate Enforcement and Cost-Sharing Reduction (CSR) Payments |
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| State | Insurer | Average Rate Increase Requested | Individual Mandate Assumption | CSR Payments Assumption | Requested Rate Increase Due to Mandate or CSR Uncertainty |
| CT | ConnectiCare | 17.5% | Weakly enforced1 | Not specified | Mandate: 2.4% |
| DE | Highmark BCBSD | 33.6% | Not enforced | Not paid | Mandate and CSR: 12.8% combined impact |
| GA | Alliant Health Plans | 34.5% | Not enforced | Not paid | Mandate: 5.0% CSR: Unspecified |
| ID | Mountain Health CO-OP | 25.0% | Not specified | Not paid | CSR: 17.0% |
| ID | PacificSource Health Plans | 45.6% | Not specified | Not paid | CSR: 23.2% |
| ID | SelectHealth | 45.0% | Not specified | Not paid | CSR: 20.0% |
| MD | CareFirst BlueChoice | 45.6% | Not enforced | Potentially not paid | Mandate: 20.0% |
| ME | Harvard PilgrimHealth Care | 39.7% | Weakly enforced | Potentially not paid | Mandate: 15.9% |
| MI | BCBS of MI | 26.9% | Weakly enforced | Potentially not paid (two rate submissions) | Mandate: 5.0% |
| MI | Blue Care Network of MI | 13.8% | Weakly enforced | Potentially not paid (two rate submissions) | Mandate: 5.0% |
| MI | Molina Healthcare of MI | 19.3% | Weakly enforced | Potentially not paid (two rate submissions) | Mandate: 9.5% |
| NM | CHRISTUS Health Plan | 49.2% | Not enforced | Potentially not paid | Mandate: 9.0%, combined impact of individual mandate non-enforcement and reduced advertising and outreach |
| NM | Molina Healthcare of NM | 21.2% | Weakly enforced | Paid | Mandate: 11.0% |
| NM | New Mexico Health Connections | 32.8% | Not enforced | Potentially not paid | Mandate: 20.0% |
| OR* | BridgeSpan | 17.2% | Weakly enforced | Potentially not paid | Mandate: 11.0% |
| OR* | Moda Health | 13.1% | Not enforced | Potentially not paid | Mandate: 1.2% |
| OR* | Providence Health Plan | 20.7% | Not enforced | Potentially not paid | Mandate: 9.7%, largely due to individual mandate non-enforcement |
| TN | BCBS of TN | 21.4% | Not enforced | Not paid | Mandate: 7.0% CSR: 14.0% |
| TN | Cigna | 42.1% | Weakly enforced | Not paid | CSR: 14.1% |
| TN | Oscar Insurance | NA (New to state) | Not enforced | Not paid | Mandate: 0%, despite non-enforcement CSR: 17.0%, applied only to silver plans |
| VA | CareFirst BlueChoice | 21.5% | Not enforced | Potentially not paid | Mandate: 20.0% |
| VA | CareFirst GHMSI | 54.3% | Not enforced | Potentially not paid | Mandate: 20.0% |
| WA | LifeWise Health Plan of Washington | 21.6% | Weakly enforced | Not paid | Mandate: 5.2% CSR: 2.3% |
| WA | Premera Blue Cross | 27.7% | Weakly enforced | Not paid | Mandate: 4.0% CSR: 3.1% |
| WA | Molina Healthcare of WA | 38.5% | Weakly enforced | Paid | Mandate: 5.4% |
| NOTES: The CSR assumption “Potentially not paid” refers to insurers that filed initial rates assuming CSR payments are made and indicated that uncertainty over CSR funding would change their initial rate requests. In Michigan, insurers were instructed to submit a second set of filings showing rate increases without CSR payments; the rates shown above assume continued CSR payments. *The Oregon Division of Financial Regulation reviewed insurer filings and advised adjustment of the impact of individual mandate uncertainty to between 2.4% and 5.1%. Although rates have since been finalized, the increases shown here are based on initial insurer requests. 1Connecticare assumes a public perception that the mandate will not be enforced. SOURCE: Kaiser Family Foundation analysis of premium data from Healthcare.gov and insurer rate filings to state regulators. |
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Discussion
A number of insurers have requested double-digit premium increases for 2018. Based on initial filings, the change in benchmark silver premiums will likely range from -5% to 49% across these 21 major cities. These rates are still being reviewed by regulators and may change.
In the past, requested premiums have been similar, if not equal to, the rates insurers ultimately charge. This year, because of the uncertainty insurers face over whether the individual mandate will be enforced or cost-sharing subsidy payments will be made, some companies have included an additional rate increase in their initial rate requests, while other companies have said they may revise their premiums late in the process. It is therefore quite possible that the requested rates in this analysis will change between now and open enrollment.
Insurers attempting to price their plans and determine which states and counties they will service next year face a great deal of uncertainty. They must soon sign contracts locking in their premiums for the entire year of 2018, yet Congress or the Administration could make significant changes in the coming months to the law – or its implementation – that could lead to significant losses if companies have not appropriately priced for these changes. Insurers vary in the assumptions they make regarding the individual mandate and cost-sharing subsidies and the degree to which they are factoring this uncertainty into their rate requests.
Because most enrollees on the exchange receive subsidies, they will generally be protected from premium increases. Ultimately, most of the burden of higher premiums on exchanges falls on taxpayers. Middle and upper-middle income people purchasing their own coverage off-exchange, however, are not protected by subsidies and will pay the full premium increase, switch to a lower level plan, or drop their coverage. Although the individual market on average has been stabilizing, the concern remains that another year of steep premium increases could cause healthy people (particularly those buying off-exchange) to drop their coverage, potentially leading to further rate hikes or insurer exits.
Methods
Data were collected from health insurer rate filing submitted to state regulators. These submissions are publicly available for the states we analyzed. Most rate information is available in the form of a SERFF filing (System for Electronic Rate and Form Filing) that includes a base rate and other factors that build up to an individual rate. In states where filings were unavailable, we gathered data from tables released by state insurance departments. Premium data are current as of August 7, 2017; however, filings in most states are still preliminary and will likely change before open enrollment. All premiums in this analysis are at the rating area level, and some plans may not be available in all cities or counties within the rating area. Rating areas are typically groups of neighboring counties, so a major city in the area was chosen for identification purposes.