ACA Uncertainty Gives Rise to Stark 2018 Premium Changes

Insurers operating in the Affordable Care Act marketplace face fresh uncertainties as they plan for 2018: whether Congress will continue in its efforts to repeal or replace the ACA, whether the Trump administration will enforce the individual mandate, or even whether the federal government will continue to pay insurers for cost-sharing reductions are all unanswered questions.

Insurers operating in the Affordable Care Act (ACA) marketplace face fresh uncertainties as they plan for 2018: whether Congress will continue in its efforts to repeal or replace the ACA, whether the Trump administration will enforce the individual mandate, or even whether the federal government will continue to pay insurers for cost-sharing reductions (CSR) are all unanswered questions that health plans must address as they make preliminary filings for their 2018 rates.

Though the individual insurance market has been stabilizing over time, concerns remain that steep premium increases could cause healthy individuals to drop coverage—which would lead to further rate increases and possible insurer exits from the marketplace. Despite recent poll results showing that 78% of Americans believe the Trump administration should make the current healthcare law work, and that 60% believe that that President Trump and congressional Republicans are responsible for any future problems with the ACA, there is little indication that efforts to stabilize the market are forthcoming. President Trump announced an intention to “let Obamacare fail” in July, and House Republicans are currently suing over CSR payments—which provide extra assistance for consumers who make from 100% to 250% of the poverty line to cover co-payments and deductibles—which they claim are unconstitutional.

As a result of such unusual uncertainty surrounding policy, some insurers have factored the potentials of an unenforced individual mandate and discontinued CSRs into preliminary 2018 rates in the form of increased premiums. Other insurers have signaled that they could refile with higher premiums later, or that they might entirely withdraw from the market.

Insurers Prepare With Higher Premiums

A new report issued by the Kaiser Family Foundation examines these premium increases, as reported in preliminary insurer filings to state regulators. The analysis includes preliminary premium and insurer participation information derived from 20 states (and the District of Columbia) where publicly available filings provide enough data to show the premium for an enrollee in second-lowest cost silver plan—the benchmark insurance plan in which 71% of participants enroll—in the major city of each state represented.

Of the 21 major cities examined, the monthly premium for a 40-year-old non-smoker silver plan enrollee who makes $30,000 per year ranged from a low of $244 in Detroit, Michigan (a 3% increase from 2017’s monthly premium), to a high of $631 in Wilmington, Delaware (a 49% increase over 2017).

Taxpayers Shoulder the Cost of Rate Hikes

However, as the analysis points out, 84% enrollees in the marketplace receive a tax credit that caps the amount that an individual or family must spend on a plan in their area at a certain percentage of their income, regardless of the plan’s sticker price. These tax credits increase with the premiums, effectively insulating enrollees from price hikes. Thus, 2018’s preliminary numbers result in a 44% increase in the tax credit for enrollees in Detroit, and a 99% increase for enrollees in Wilmington. Taxpayers bear most of the burden for higher insurance premiums, and middle- and upper-income enrollees who purchase coverage off the exchange will pay full premiums (as they are ineligible for subsidies).

Since 2014, when the ACA first took effect, the average annual change in price for the benchmark plan has varied widely from state to state: from -4% in Providence, Rhode Island, to 28% in Nashville, Tennessee. Yet once tax credits have been factored into the average annual percent change for the enrollee with a $30,000 annual income, prices paid by enrollees have, overall, declined; in 18 cities, the average annual percent change has been approximately -1%. Only 3 cities had seen average annual post-credit increases: Albuquerque, New Mexico (1%); Nashville, Tennessee (2%); and Minneapolis, Minnesota (6%).

Options May Dwindle

Even if enrollees do not feel the impact of premium increases, they may face the challenge of fewer available plan options in 2018. Many insurers state that, should they not achieve clarity as to the administration’s plans to enforce the individual mandate by August 16, they may choose to increase their premiums even further, or exit the marketplace entirely. In preliminary filings, an average of 4.6 insurers have indicated plans to participate in the ACA exchange in 2018, compared with an average of 5.1 insurers per state last year (and an average 6.7 per state at the height of participation in 2015). Furthermore, because insurers frequently serve only part of a particular state, the number of choices available to consumers in any given area will likely be lower than the average number suggests.

Some states could be particularly hard-hit by the reduced number of health plans participating in the ACA in 2018; Delaware could be left with only 1 health plan after Aetna’s proposed exit, and Indiana could see its options shrink to 2 after Anthem and MDwise exit the state. By comparison, enrollees in Indiana had access to a total of 8 plans in 2015.

Among plans that intend to remain in the market, many have requested substantial increases to their average rates should the individual mandate cease to be enforced. Those increases range from 1.2% to 20%. Among companies who assume that the CSR payments affecting silver plans will be discontinued, plans factor in an additional rate increase ranging from 2% to 23%. The report notes that insurers may also choose to apply a surcharge to silver plans to compensate for the loss of CSR payments.

The authors conclude that, based upon preliminary filings, the change in benchmark silver premiums could range from -5% to 49% across the major cities assessed, but that the rates identified in the analysis could change significantly between now and the open enrollment period, as the policy landscape continues to change. One thing, however, is certain: insurance companies must soon lock in contracts for their 2018 premiums, and changes made by the administration or Congress in the coming months could lead to significant losses for companies if they have not priced their plans to compensate for overhauls.