Half of Arkansas's health insurance marketplace enrollees may soon be priced out, documents suggest

On Friday morning, Gov. Sarah Sanders said she had "secured average rate increases that are 35.8% lower than previously proposed" from BlueCross and Centene, the two insurance companies that sell plans on the Arkansas Health Insurance Marketplace. (The marketplace is how people who aren't covered through an employer, family member, or Medicaid typically buy health insurance.)

Sanders, who publicly slammed BlueCross and Centene in August for proposing "insane" 2026 rates (an average hike of 36%), claimed this as a victory for Arkansans. "More work remains, but this is a good starting point and shows that when we stand up to insurance companies, we can win tangible benefits for the people of our state," she said.

But that 35.8% price reduction she touted? That's simply a comparison to the initial proposal from insurers back in August. What ultimately matters to Arkansas health insurance consumers is the price bump that remains: The average premium increase next year will still be more than 22%, according to a chart included in the governor's statement.

A 22% rate would be an enormous jump. For comparison, individual rates have risen by somewhere between 2% and 6% annually since 2020, according to the Arkansas Center for Health Improvement.

Inconveniently for Sanders, the blame for the massive hike lies squarely with Congressional Republicans. The underlying situation leading rates to soar remains the same as it was in August. Most Americans who buy a marketplace plan get help from the federal government through tax subsidies created by the Affordable Care Act, or ACA, the health reform legislation often called Obamacare. The Biden administration boosted the size of those subsidies during the pandemic, prompting millions of people who were not enrolled in a marketplace plan before to sign up. Arkansas enrollment more than doubled.

But the "enhanced" subsidies put in place under Biden are set to shrink dramatically next year, and congressional Republicans refuse to renew them. Instead, GOP lawmakers drastically cut health care spending in the One Big, Beautiful Bill to make way for an extension of Trump's tax cuts.

Without enhanced Affordable Care Act subsidies, millions of Americans now in the marketplace will no longer be able to afford coverage. Younger and healthier people will drop their insurance first, making the remaining risk pool older, sicker and more expensive to insure. That, among other factors, is why insurers are raising 2026 rates in Arkansas and across the U.S. (We gave a more detailed explanation of this dynamic and how it will play out in Arkansas in August, though be aware the specific scenarios used as examples may no longer be accurate since the numbers are still in flux.)

The giant rate hike coming this year in Arkansas could have a number of devastating consequences for health care in the state, as acknowledged by internal documents from the Arkansas Insurance Department. Emails from Jimmy Harris, an Insurance Department official who has now been appointed interim insurance commissioner, show regulators have been bracing for the effects of the ACA subsidy cuts for months. The numbers remain in flux, and it's unclear how the governor's latest announcement might impact the final tally, but an internal memo shows how bad things may get next year: A bit more than half of the roughly 166,000 Arkansans now enrolled in an individual plan on the marketplace could drop coverage in 2026.

Sanders' spin

Faced with rough news for Arkansas consumers that is happening directly because of Republican inaction in Congress, Sanders on Friday tried some PR jiu jitsu.

After Sanders criticized the insurers in August, the Arkansas Insurance Department asked them to go back to the drawing board and come up with new rate proposals. Although the governor strongly implied otherwise, claiming she "secured" the changes, the new rate proposals have not been finalized and likely won't be until the end of September. But Sanders, perhaps concerned over bad press about the GOP-induced rate hikes, pre-emptively released a statement to announce where things currently stand. Assuming these figures hold, it's an improvement on the proposal from August. Just don't pay attention to the remaining rate hike behind the curtain.

Muddying the waters further, there's something peculiar about the numbers in the chart from Sanders' office: The "initially proposed" increases aren't the same figures as the ones released to the public in August by the Insurance Department.

Both the governor's office figures released Friday and the insurance department figures released in August are expressed in topline numbers for each of six carriers (all of which are owned by either Centene or Blue Cross). Five of the six numbers listed in the governor's chart are different (higher or lower) than those released by the insurance department in August, sometimes dramatically so (one changed by 29 percentage points).

It's unclear how the governor's new numbers might have been calculated. The governor's office has not responded to queries, so there is simply no way to know where the figures are coming from. Strangely, the governor's press release referred to one eye-popping increase (54.2%) that was listed on the August insurance department release but not in the governor's own figures. It's a mystery.

It's not clear how the changes might impact the broader claims Sanders is making about how much she has gotten the insurance department to lower rates since August. But it casts doubt on whether Sanders' is comparing apples to apples in a reliable way in their eagerness to claim they've pressured the insurers to settle for a much lower increase.

The only thing that's certain at this point: No matter how Sanders spins it, people shopping on the Arkansas Health Insurance Marketplace will be facing massive sticker shock, with disastrous consequences for health coverage in the state.

Internal records: They knew this was coming

In August, the Arkansas Times sent a Freedom of Information Act request to the Insurance Department in search of clues about whether the huge proposed increases were justified. Insurance companies can't just raise rates arbitrarily — they have to show that it's necessary by detailing their expected expenses (medical claims) for the upcoming year, along with expected revenue (premiums). State regulators use third-party actuaries to analyze those proposals. If the insurers were in fact trying to take advantage of Arkansans, as Sanders said in August, such price gouging should have been flagged by the pros the state hires to do such work.

After weeks of delay from the state, we finally got our FOIA response from the Insurance Department earlier this month. It turns out that the Arkansas Insurance Department knew since at least early July that dramatic rate hikes were almost certainly coming.. In an Aug. 11 memo, insurance department officials stated that the expected number of people covered by the marketplace next year would be less than half of the 166,000 Arkansans currently covered. That appears to suggest that around 86,000 people would be priced out of the marketplace.

The FOIA'd records also show Arkansas regulators have been working to cushion the effects of the loss of the enhanced ACA subsidies. The Insurance Department is requiring insurers to structure their plans in such a way that maximizes the remaining ACA subsidies and attempts to control out-of-pocket costs for Arkansans — a policy change that could make a real difference. But it's hard to see how it could fully offset the subsidy cuts from congressional Republicans.

The records also shed light on other reasons rates are going up next year, independent of the enhanced ACA subsidies expiring. Health care costs everywhere are increasing, thanks to expensive new drugs, rising labor costs and an aging population. In Arkansas, that's coupled with new mandates from the state Legislature to cover procedures and services ranging from bariatric surgery to doulas and community health workers. It all adds up to bad news for the tens of thousands of families who buy their own coverage.

'This looks dire'

On July 2, a lawyer and senior manager at Centene named Brett Thompson-May sent an email to Donna Lambert, a compliance officer at the Arkansas Insurance Department, about a report the insurance company had just received from an actuarial consultant, Wakely.

The Wakely report showed "significant, extremely concerning results," Thompson-May wrote. Market morbidity trends — the rate at which people get sick or injured — were far higher than expected.

"This data shows statewide morbidity increasing far beyond our expectations in 2025, and in many markets, already exceeding our existing statewide morbidity estimates for 2026 — even before accounting for the incremental impact of [enhanced ACA subsidy] expiration," he said. The numbers were so high that Centene executives "no longer believe our current 2026 rate submission is actuarially sound," he said.

Lambert forwarded the email to Jimmy Harris, at the time the Insurance Department's compliance director, and Lewis & Ellis, its actuarial firm.

"This looks dire," she said.

Harris has since been appointed interim insurance commissioner; the former commissioner, Alan McClain, stepped down at the end of August after five years heading the agency.

Emails throughout July show officials at the department and its parent agency, the Arkansas Department of Commerce, discussing the proposed rate hikes. On July 20, Secretary of Commerce Hugh McDonald — a member of the governor's cabinet — asked for an explanation of how the end of the enhanced ACA subsidies would drive up premiums.

Harris replied, explaining that the enhanced subsidies helped middle-class families who couldn't afford coverage.

"Many of the middle income families that fit in that income level will drop their insurance because they had low or no premium health insurance for their family and costs will increase substantially," he wrote. "Most insureds in this group have far better morbidity than what is left in the individual market, driving up premiums for the rest of the market."

McDonald also asked about another factor cited by the insurance companies — the expected return of an Arkansas Medicaid work requirement. This matters for private health insurance markets in Arkansas because the state's unusual variant of Medicaid expansion provides essentially free marketplace insurance plans to low-income Arkansans, with the premiums paid to insurers with Medicaid funds. About 180,000 poor adults in Arkansas have this type of coverage, which is now called ARHOME (previously it was known as Arkansas Works and the "private option").

The big population that ARHOME brings to the health insurance marketplace in Arkansas means that the marketplace's stability is tied to Medicaid expansion. If large numbers of people are kicked off Medicaid, BlueCross and Centene will lose the revenue from those premiums, hurting their bottom line. And the state's history with work requirements shows the policy could strip coverage from large numbers of people — even those who are working, as most ARHOME beneficiaries are — by making them jump through hoops and do pointless busywork to prove to the state they're in compliance.

"Experience has shown, work requirement execution has potential to remove people from plans unnecessarily, creating administrative headaches," Harris told McDonald. "I believe this is a factor in Arkansas, but other factors at play are exacerbating the issue."

Harris also noted the Legislature had recently passed new laws requiring insurers to cover some conditions or procedures not already mandated under federal law. Worthy or not, those guarantees of coverage also mean higher costs for insurers.

"The legislative mandates are driving up premiums," he said.

Coverage losses on the horizon

At no point in the email exchanges reviewed by the Arkansas Times does an Insurance Department staffer or actuarial consultant say the numbers from BlueCross and Centene appear to be excessive or unjustified. The FOIA request encompasses a roughly five-week period from mid-July to mid-August.

But on Aug. 6, Sanders publicly threw down the gauntlet against the insurance companies, saying their rate proposals were "unacceptable" and "insane." She called on then-Insurance Commissioner Alan McClain to reject them.

The next week, on Aug. 11, top officials at the Commerce Department began circulating a memo from Harris titled "AID Rates Summary Info." Allison Hatfield, the department's chief of staff, described it to Secretary Hugh McDonald as a "draft response document Jimmy worked on while working through the rates issue with the GO [governor's office]."

The document, which hasn't been made public previously, includes a technical explanation of how the impact of the rate hikes could be mitigated by a coordinated policy on insurance plan pricing. The size of ACA subsidies are calculated according to the cost of a certain benchmark, mid-tier (or "silver") plan in a given market. But that silver-based subsidy can be used to buy a lower-tier "bronze" plan or a higher-tier "gold" plan. So if insurers dramatically raise rates on silver plans, but not bronze or gold, that will increase the size of subsidies and can wind up lowering out-of-pocket costs for bronze or gold customers. For a full explanation of this practice, called "silver loading" in the insurance world, read this walk-through by national health policy analyst Charles Gaba, who examined the Insurance Department memo at our request.

The Aug. 11 memo from Harris says the department's recommended silver loading method will have the effect of "[driving] down effective premiums for most Arkansans on the exchange." Presumably, he means reducing actual out-of-pocket costs for consumers relative to the high rates expected in 2026 (Harris did not respond to requests for further explanation on what he meant). If so, tens of thousands of people still look to be priced out of coverage, even if cleverly applied silver loading may mitigate the problem. Because insurance department officials won't comment, it also remains unclear whether the specific policy machinations described in August are still on the table today.

The final page of the memo includes a pie chart titled, "What is a rough estimate of actual impact of these individual marketplace rates for Plan Year 2026?" It gives total projected marketplace enrollment for the year as 260,000, a figure that includes 180,000 enrolled in ARHOME — the low-income Medicaid beneficiaries who are enrolled in a private plan fully paid for with Medicaid expansion. That leaves about 80,000 people expected to purchase individual policies on the Arkansas marketplace next year.

This number is significant because there are currently more than 166,000 people who buy insurance on the state marketplace. It implies a decline in enrollment of 86,000, or more than half the current number. (The figure is also in the ballpark of where the Arkansas marketplace was in 2021, before the enhanced subsidies kicked in.)

When asked whether the department projects 86,000 Arkansans will drop marketplace coverage in 2026 — and provided with a copy of the FOIA'd document — Harris responded by email. "AID does not make projections on marketplace enrollment," he said. "Enrollment projections are made by insurers."

Enrollment projections for 2026 are referenced in the actuarial filings BlueCross and Centene have made with the Insurance Department. Those filings are publicly available but heavily redacted, because they contain trade secrets. Next year's enrollment projections for the individual companies are among the redacted information.

Harris did not answer follow-up questions about whether the department expects enrollment to decline due to increased out-of-pocket costs.