By Shelby Livingston | May 7, 2018
Health insurers are seeking lofty rate hikes for 2019 individual coverage as they grapple with new obstacles in the Affordable Care Act marketplace, including the zeroed-out mandate penalty and the potential influx of skimpy insurance policies.
Maryland and Virginia are the first states to announce the rates filed by insurance companies for 2019 plans. The requests, though not final, offer an early look at what other insurers may be planning across the country.
In Maryland, the two insurers selling individual insurance plans on the ACA marketplace are asking for an average rate increase of about 30% for 2019 coverage. That would amount to an average monthly premium of about $592 per member, compared with $449 per month in 2018.
Nearly 212,000 people are insured in individual plans on and off the exchange in Maryland this year.
Maryland Insurance Commissioner Al Redmer said Monday that those rates could come down if the federal government approves the state’s soon-to-be-submitted application for a 1332 waiver and reinsurance program to subsidize the medical claims of high-cost patients, though he wouldn’t speculate as to how much.
“We are at a place in the individual market where any increase at all creates stress in the marketplace,” Redmer said during conference call with reporters. “We have over the last number of years seen losses that are unsustainable which have resulted in premium increases that are unsustainable. We have folks in Maryland that are struggling, that are trying to do the right thing and they are paying more for their health insurance than they are for their mortgage.”
CareFirst Blue Cross and Blue Shield requested an average rate increase of 18.5% for its HMO plan and 91.4% for its PPO plan. The bulk (90%) of CareFirst’s 138,000 Maryland individual plan members are enrolled in HMO coverage. Kaiser Foundation Health Plan, which covers 73,700 individual members in the state, asked Maryland regulators for a rate increase of 35%.
CareFirst CEO Chet Burrell on Monday said rate requests in Maryland could be reduced by as much as 20% to 30% if a reinsurance program is approved.
Burrell said CareFirst’s requested rate hikes are necessary because the pool of people signing up for individual insurance plans continues to shrink and grow sicker. Enrollment in Maryland’s individual market has fallen to 211,000 in 2018 from 243,000 the year before, and will likely continue to decrease in 2019.
As rates have increased over the years, healthier enrollees opted to forgo coverage, leaving the sicker, costlier members behind. Trump administration actions, including the 2019 zeroing out of the mandate penalty, only exacerbated the problem by undermining enrollment of younger, healthier members, Burrell said. CareFirst expects to have lost about $476 million on individual plans in Maryland through 2018. In Virginia, the company has lost $59 million but expects to break even in 2018.
“The rates, as high as they’ve been and as steeply as they have increased, have not kept up with how costly it is to take care of people who are as sick as the population involved,” Burrell said.
About 5% of CareFirst’s requested rate hikes can be attributed to the zeroing out of the individual mandate penalty, according to the Maryland insurance department. Kaiser didn’t specify how much of its rate request was driven by the individual mandate penalty. And neither of the two Maryland insurers raised rates because of the federal administration proposal to expand access to skimpy short-term medical plans, likely because Maryland caps the sale of those plans to three months—the current federal limit.
Meanwhile, Virginia insurers asked for a wide range of rate increases. CareFirst is seeking a 26.6% rate hike for its HMO plans in the state, and 64.3% for its PPO plans for the same reasons as its Maryland rate increase requests.
Cigna Corp. filed for a 15% increase; Kaiser asked for a 32.1% increase for its individual plans; and Piedmont Community HealthCare requested an 18.3% rate increase.
Some Virginia rate requests were lower. Anthem’s HealthKeepers subsidiary asked to increase 2019 rates for its on- and off-exchange plans by 5.6% on average, while Optima is seeking to lower rates by an average 1.9%.
Last year, individual insurance rates went up about 30% over 2017 rates largely because of the pervasive uncertainty over the future of the exchanges as congressional Republicans worked to repeal and replace the ACA. The Trump administration’s decision to stop making cost-sharing reduction payments in the fourth quarter of 2017 also led to large premium increases for 2018 coverage, but actuaries say that was a one-time adjustment and won’t affect 2019 rates.
Though repeal efforts fell flat, questions remain about how many people will enroll in individual coverage in 2019 and how sick and costly that population will be. The elimination of the individual mandate penalty and the extension of short-term medical plans to a maximum of 364 days will likely be the biggest drivers of 2019 rates.
The Congressional Budget Office projected that premiums for the most popular silver plans on the ACA exchanges would jump an average 34% next year. The left-leaning Urban Institute has estimated that eliminating the individual mandate penalty, along with expanding short-term medical plans, would increase individual premiums 18.2% on average in states that do not restrict short-term plans.