Federal policy uncertainty drove health insurers to implement significant premium increases for Affordable Care Act policies in 2018, according to a new report, which predicts higher prices and more insurer withdrawals from the individual market in 2019.
Researchers at the Urban Institute and Georgetown University’s Center on Health Insurance Reforms interviewed a range of insurers participating in ACA marketplaces in 28 states and the District of Columbia to determine their strategies for the 2018 and 2019 plan years.
Most insurers in the study reported they are committed to participating in the individual market, but their commitment is being tested by policies that undermine the stability of the individual market.
Marketplace stabilization is in the news again this week with the Senate considering adding cost sharing reduction (CSR) payments to insurers into a government funding bill that must be passed by the end of this week. The House of Representatives’ version of the funding bill will not include those payments.
“When we interviewed the insurers for our report, it was in late 2017, so we were not able to fully capture how insurers currently would feel about these market stabilization proposals that are in the news this week,” said Sabrina Corlette, research professor at the Center on Health Insurance Reforms at Georgetown University's Health Policy Institute and one of the authors of the study.
“But we certainly did ask about the impact of the Trump administrations to cut off CSRs in October and how that played into pricing decisions for 2018 as well as their thoughts on if Congress had restored that funding, what impact would that have,” she said.
Insurers reported they had to raise premiums for 2018 to make up for the losses associated with the CSR cutoff, Corlette said. However, a strategy known as “silver loading” helped to make these premium increases work out in some consumers’ favor, she noted. She explained it this way:
The way the ACA premium subsidies work, if a consumer is eligible for a subsidy based on income, the law essentially caps the amount of premium that a consumer pays for a given plan based on income level. And the premium subsidy is pegged to the second-lowest cost silver plan in your market. So as the premium for the second-lowest-cost silver plan rises, the consumer’s premium subsidy goes up dollar for dollar.
When it became apparent that the cost-sharing subsidies to the insurers would be cut off, state insurance regulators and insurance carriers concentrated the premium increases to their silver plans instead of spreading the premium increase across all their marketplace plans. As a result, consumers who were eligible for a subsidy found that the increased premium led to an increased tax credit.
“Interestingly, a lot of the dire predictions about sabotage and problems in the marketplace didn’t come to pass because of this creative state-level strategy,” Corlette said. “More people found they were getting better deals and it might have contributed to better than expected enrollment in 2017. There were more zero-premium bronze plans available this year as well as gold plans that were cheaper than silver plans in some places.”
An Unexpected Opinion On CSRs
But one unexpected thing that Corlette learned from surveying insurers is that many believed restoring the CSR funds might not be a good idea.
“One reason is that they were concerned about sticker shock among consumers who were getting these better than expected deals in 2018. If you restored CSR funding, premiums would come down but so would the tax credits,” she said.
Some carriers told researchers that if CSRs are to be restored, it should be a long-term change instead of having to deal with the issue repeatedly.
Carriers will soon have to figure out their 2019 rates, and Corlette said two main issues will influence pricing for next year: the repeal of the individual mandate tax penalty and the rules allowing the sale of short-term health plans and association health plans that would be exempt from many of the ACA’s requirements.
“The repeal of the tax penalty on the individual mandate requirement will drive premiums up but not necessarily in the same way for everybody,” she said. “We talked to a number of carriers who already priced for that in 2018. Now that it’s repealed, depending on the carrier and how they approached 2018, you might see different effects for 2019.”
As for the sale of short-term plans and association plans, Corlette cited uncertainty about how those plans would affect the ACA marketplace.
“Carriers said they expect it will siphon off healthy enrollment and leave them with a smaller, sicker pool,” she said.
So what’s ahead for the individual health insurance market?
“Based on the policy environment, I think we will see continued uncertainty and continued volatility, and more carriers will leave the market,” Corlette said. “My biggest concern is that for many who are trying to buy health insurance and are not eligible for premium subsidies, they will be increasingly priced out.
“Alternative coverage options such as short-term plans are only viable if you’re healthy and relatively young. If you are older and have a chronic condition, I wish I had an answer for you. Policymakers need to have a better answer than what they have today.”
Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected]. Follow her on Twitter @INNsusan.
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