Senior Fellow and Senior Counselor
We’ve written about how the Affordable Care Act (ACA) marketplaces are poised for greater stability and success going forward, but they’re also vulnerable to sabotage by policymakers. Over the past few weeks, both of these points have become increasingly clear.
A new Kaiser Family Foundation analysis confirmed earlier findings by Standard & Poor’s that insurers’ individual-market financial performance improved in 2016, putting them on track to break even or earn profits in 2017. Absent interference from policymakers, that would put the ACA marketplaces on track for lower premium increases and growing competition going forward. But initial 2018 individual-market rate filings — along with statements from insurers and state regulators — show that sabotage is taking a toll.
This week, for example, Blue Cross Blue Shield of Tennessee (Tennessee Blue) announced that it would expand its marketplace participation and offer plans in Tennessee counties that might otherwise lack an insurer. Tennessee Blue substantially improved its individual market financial performance in 2016, and its announcement noted that it has experienced further improvement so far in 2017, which likely helped convince it to offer plans in more areas. But even as Tennessee Blue announced its expanded offerings, it also cautioned that it will set 2018 rates higher than it otherwise would have due to “the potential negative effects of federal legislative and/or regulatory changes.” It also warned that it might still withdraw from the marketplace for 2018 “in the event of … changes that destabilize the market and affect our risk exposure.”
Insurers and state regulators have cited three key factors that are causing insurers to propose premiums that are higher than they otherwise would and discouraging marketplace participation for 2018:
The Administration’s threats to withhold billions of dollars in payments owed to insurers. Under the ACA, insurers must offer plans with lower deductibles and copays (“cost-sharing reductions”) to lower-income consumers; the federal government then reimburses them for the roughly $7 billion annual cost. The Administration has repeatedly threatened to withhold these cost-sharing reduction payments. Making up for the payments would require a 19 percent or greater increase in premiums for affected plans.
The Administration’s statements about the individual mandate. The individual mandate encourages healthy consumers to buy health insurance by requiring them to pay a penalty if they don’t. But the Administration has intimated that it may stop enforcing the mandate. If insurers believe the mandate won’t be enforced, they will raise premiums by up to 20 percent more than they otherwise would to cover the resulting increase in per-enrollee costs as healthier consumers forgo coverage.
The possibility of legislative upheaval. The House-passed bill to repeal the ACA would increase per-enrollee costs by 15 to 20 percent and shrink individual market enrollment by almost a quarter in 2018 by immediately repealing the individual mandate, according to Congressional Budget Office estimates. The possibility that the House bill — or similar legislation — will be enacted creates uncertainty that will lead many insurers to price and plan for a smaller and sicker customer base.
Below are some insurer and state regulator comments from across the country highlighting how Trump Administration sabotage and the threat of ACA repeal are raising premiums and jeopardizing insurer participation for 2018. We’ve also posted a more complete list, which we will update going forward, as well as a guide to making sense of 2018 individual market rate filings.
Blue Cross Blue Shield of Tennessee (Letter to State Insurance Commissioner, May 9, 2017):
“I’m pleased to report that, though still very early, our 2017 performance has improved due to a combination of better claims experience and a more sustainable rate structure based on the medical needs of the members we’re serving.”
“Given the potential negative effects of federal legislative and/or regulatory changes, we believe it will be necessary to price-in those downside risks, even at the prospect of a higher-than-average margin for the short term, or until stability can be achieved. These risks include but are not limited to the elimination of Cost Sharing Reduction subsidies (CSRs), the removal of the individual mandate and the collection of the health insurer tax.”
“And, while we hope this is unnecessary, we reserve the right not to sign our QHP [Qualified Health Plan] agreement in September in the event of any post-bid changes that destabilize the market and affect our risk exposure.”
Martin Hickey, CEO of New Mexico Health Connections (Quoted in Vox, May 8, 2017)
“Uncertainty breeds higher costs. We have to plan for the worst case scenario until it finally gets decided. We have a lot of things to focus on, we’re grinding out hours over rates, and it doesn’t help that people are running around with zombie bills.”
Geoff Bartsh, Vice President of Medica in Iowa (Des Moines Register, May 3, 2017)
“Bartsh said Congress isn’t helping the situation by continuously arguing over how to change rules in midstream while insurers are trying to figure out their rates for 2018. When asked what advice he would have for current Medica customers in Iowa, Bartsh replied, ‘call your elected officials.’”
Teresa Miller, Pennsylvania’s State Insurance Commissioner, and the CEOs of Highmark, Geisinger, UPMC Health Plan, Independence Blue Cross, and Capital Blue Cross (Letter to Health and Human Services Secretary Tom Price, April 26, 2017)
“Specifically, the most immediate drivers of instability are the weakening of the individual mandate, the uncertain status of funding for the cost sharing reductions and the absence of funding for overall market stabilization measures.”
“The absence of certainty regarding market parameters, and in particular those with direct financial consequence, magnify the risks of market participation in a way that issuers and regulators cannot ignore.”
Joseph Swedish, Chairman and CEO of Anthem BlueCross BlueShield (CNBC, April 26, 2017)
"We are notifying our states that if we do not have certainty that CSRs [cost-sharing reduction payments] will be funded for 2018 by early June, we will need to evaluate appropriate adjustments to our filing," Swedish said. Those adjustments could include resubmitting higher rates increases, "or exiting certain individual ACA-compliant markets altogether."
Dave Jones, California’s Insurance Commissioner (Memo to California Insurers, April 24, 2017)
“In light of all the actions taken by the Trump Administration and House Leadership to undermine the ACA, I expect that health insurers will consider filing significant rate increases for 2018. Further, I am concerned that this needless uncertainty may, in some cases, cause insurers to leave markets entirely.”