The first Affordable Care Act rate filings for individual plans offer an early look into how insurers have reacted to the regulatory challenges that the embattled health law faced in 2017.
While the first rate requests filed in Maryland, Virginia and Oregon call for substantial increases, state regulators have several months to negotiate with insurers to bring them down. State insurance commissioners walk a tightrope between keeping costs low for consumers and persuading insurers to continue offering plans in their states. Ensuring that insurers will still write ACA marketplace plans has become a major issue as companies such as Anthem Inc. whittled down their offerings in 2017, while Aetna Inc. decided to completely cease writing new policies.
According to an S&P Global Market Intelligence analysis of individual plan rate requests, Group Hospitalization & Medical Services Inc. and CareFirst of Maryland Inc. sought nearly 100% increases in their bronze plan offerings.
ACA plans come in five "metal" levels — copper, bronze, silver, gold and platinum — which describe how comprehensive the benefits are in the plans.
Kaiser Foundation Health Plan of the Mid-Atlantic States Inc. requested an average rate hike of 37.92% in Maryland, while CareFirst BlueChoice Inc. requested an average rate increase of 18.50%, which will impact 123,188 of its members.
CareFirst BlueCross BlueShield President and CEO Chet Burrell wrote in a statement to S&P Global Market Intelligence that the company's steep rate increases are concerning, but stressed that they are required to cover a population that is "generally far sicker than the average member in the community."
Burrell wrote that the problem has been "worsened" by fewer younger, healthier people who are "needed to moderate overall costs in the individual insurance marketplace" signing up for plans.
State regulators and insurers themselves do have a few options to help bring down costs for consumers. One option allows insurers to significantly increase the price of silver-level plans, in order to trigger higher federal subsidies, while only modestly raising rates on other plans. The practice, known as "silver-loading," effectively makes insurance extremely cheap, and for some consumers, free.
Another lever is a 1332 waiver, which allows states to run and adjust their own health systems. For instance, the state of Alaska in 2016 created a reinsurance program for residents with expensive medical conditions, and then used a 1332 waiver to allow for the savings from lower ACA tax credits to return to the state to offset the cost of the program.
Requests for such waivers, however, have to pass through the full legislative process in each state.
One of Maryland's U.S. senators said that a 1332 waiver, if approved by federal health insurance regulators, should bring some of those rates down.
"If [the waiver] is approved by the federal government, it should bring down these rates," Sen. Ben Cardin, D-Md., said. "I would hope this would be approved; the Maryland legislature provided the steps for the reinsurance program ... I don't see any reason why it wouldn't be approved."
Maryland's 1332 waiver would allow the state to create reinsurance programs to cover the most-expensive claims from the highest-cost consumers.
“We are working with our federal partners to expedite approval for Maryland’s reinsurance waiver, and we continue to call for action at the federal level to fix our broken health insurance system,” Larry Hogan, Maryland's Republican governor, wrote in a statement.
James Capretta, a resident fellow at the right-leaning think tank American Enterprise Institute, said that while President Donald Trump's policies aimed at chipping away at parts of the ACA led to many of these increases, there were problems with the health law that predated his administration.
Capretta said enrollment numbers in ACA plans never quite met expectations; the market always enrolled more consumers that file an elevated number of claims.
"Even if the Trump administration had never shown up, there was likely to be some level of adverse selection in the individual market," Capretta said.
Trump in an October 2017 executive order directed federal agencies and departments to ease regulations around association health plans, short-term health plans and health savings accounts. But by expanding the length of short-term health plans and eliminating cost-sharing reductions that help cover low-income consumers, the White House has sowed uncertainty into the individual market, Capretta said. And that uncertainty gives insurers a reason to boost their rates, he added.
With longer short-term health plans, the elimination of cost-sharing reductions and a repeal of the health law's requirement that everyone purchase health insurance, these early rate increase requests are "only the beginning," according to Capretta.
"I don't expect it to be like Maryland across the whole country, but I wouldn't be at all surprised if the average [rate increase] across the country [were] 15% to 25%," he said.
S&P Global Market Intelligence offers a variety of tools to analyze the rate and product filings of insurance companies.
Click here for a webinar with information on the resources S&P Global Market Intelligence has available regarding rate filings.