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June 6, 2017

Political uncertainty fueling double-digit ACA individual rate hikes

All three health insurers offering coverage in Maine’s Affordable Care Act marketplace are seeking double-digit rate hikes for individual health insurance plans in 2018.

Harvard Pilgrim Health Care is seeking the largest rate increase, proposing an average proposed hike of 39.7%, followed by Anthem Blue Cross and Blue Shield with 21.2% and Community Health Options with 19.6%.

The insurers cite political uncertainties surrounding the future of the ACA as a key factor in driving up premium rates for the individual market — most notably, the Trump administration’s loosening of the federal government’s enforcement of the mandate requiring individuals who aren’t insured to sign up for coverage or face a financial penalty.

“Without enforcement of the coverage mandate, membership is expected to drop, with the healthier individuals more like to forego coverage,” Harvard Pilgrim stated in its submission filed with the Maine Bureau of Insurance. “This will drive up the average cost of health care for the individual market. Therefore an adjustment is needed to account for the higher expected claims costs.”

The proposed rate hikes in the individual market are for coverage that would begin on Jan. 1, 2018. Proposals also were submitted by the three insurers and two others, Aetna and United HealthCare, in the ACA-compliant small group market. Hearings on the rate proposals by the Maine Bureau of Insurance would begin in July.

The Portland Press Herald reported that the Bureau of Insurance estimated that of the 85,300 Maine residents covered by ACA-compliant individual insurance plans in the first quarter of 2017, CHO had the largest market share with 35,100 Mainers, followed by Anthem with 27,700 and Harvard Pilgrim with 21,400. 

Other factors driving the rate hikes

A shrinking risk pool that would result in a greater percentage of older and potentially less healthy people remaining in the Maine ACA individual marketplace isn’t the only concern expressed by the insurers in their rate filings.

Anthem and Harvard Pilgrim highlighted the political uncertainty surrounding the continuation of Cost Share Reduction subsidies, which the ACA required insurers to offer enrollees with incomes 100% to 250% of the poverty level for silver-level plans. The subsidies were intended to help insurers reduce deductibles and copays for the qualifying customers; to compensate for the added cost to the insurers, the federal government had promised to reimburse them for the higher costs.

But, like many of the ACA’s provisions, the future of those payments — which the Congressional Budget Office estimated would cost $7 billion in fiscal year 2017, $10 billion in 2018 and $16 billion by 2027 — is uncertain.

“A lack of CSR funding introduces a level of volatility which compromises the ability to set rates responsibly,” Anthem stated in the cover letter accompanying its filing, noting that without CSR funding premium rates for silver plans could increase by an additional 20% and possibly “necessitate additional adjustments.”

Among the possible adjustments Anthem cited if the CSR subsidies are eliminated:

  • “Reducing service area participation”
  • “Requesting additional rate increases”
  • “Eliminating certain product offerings”
  • “Exiting certain individual ACA-compliant markets altogether.”

In its filing memorandum, Lewiston-based Community Health Options noted the major driver of its rate increase is its expectation that the individual risk pool in Maine will shrink.

“We expect that a weak individual mandate combined with higher premiums in the individual market will lead to increased market contraction in 2018,” CHO’s consulting actuary Kathleen E. Ely stated in the insurer’s cover letter. “Healthier people and those whose premiums are unsubsidized will be more likely to not continue to purchase health coverage.”

Noting that CHO’s individual 2017 risk pool is older and enrolled in “less rich plans” than in 2015-16, Ely wrote that early 2017 claims through March were running 9% higher than expected.

Read more

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