In­sur­ers look ahead to rate bat­tles

Modern Healthcare - - NEWS - By Bob Her­man

The U.S. Supreme Court’s de­ci­sion to up­hold the Af­ford­able Care Act’s pre­mium sub­si­dies in all states was a huge re­lief to health in­sur­ers, po­ten­tially en­cour­ag­ing them to step up their par­tic­i­pa­tion in the in­di­vid­ual ex­change mar­ket. Now at­ten­tion turns to ten­sion be­tween in­sur­ers and reg­u­la­tors over moves to raise premi­ums for 2016.

In­sur­ers say the rul­ing in King v. Bur­well means mil­lions more Amer­i­cans, in­clud­ing younger and health­ier peo­ple, will sign up for ex­change plans in fu­ture years, mak­ing that busi­ness more vi­able. That de­pends, of course, on the fate of the ACA fol­low­ing the 2016 elec­tions. And in­sur­ers will con­tinue to scru­ti­nize the de­mo­graph­ics and med­i­cal uti­liza­tion of the ex­change pop­u­la­tion to make their rate cal­cu­la­tions.

Last week, in­sur­ers and reg­u­la­tors ex­pressed sat­is­fac­tion that the high court had pre­served the sub­si­dies and avoided a melt­down in the en­tire in­di­vid­ual in­sur­ance mar­ket in states us­ing the fed­eral ex­change. It’s es­ti­mated that 18 mil­lion Amer­i­cans have cov­er­age through the in­di­vid­ual mar­ket. Of that to­tal, 6.4 mil­lion re­ceive cov­er­age through the fed­eral ex­change.

“The de­ci­sion al­lows reg­u­la­tors, con­sumers and the in­dus­try a level of cer­tainty that sup­ports sta­bil­ity for in­sur­ance mar­kets in our states,” said Mon­ica Lin­deen, pres­i­dent of the Na­tional As­so­ci­a­tion of In­sur­ance Com­mis­sion­ers and the head of Mon­tana’s in­sur­ance depart­ment.

Ex­perts had warned that elim­i­nat­ing the sub­si­dies would have led to a death spi­ral in the in­di­vid­ual mar­ket be­cause cov­er­age would have be­come un­af­ford­able for many of those los­ing pre­mium as­sis­tance. Health­ier peo­ple would have dropped their plans, while sicker peo­ple would have scram­bled to keep theirs. In­sur­ers would have sought gi­ant rate in­creases or dropped out of the in­di­vid­ual mar­ket.

“If the sub­si­dies had not been up­held, sub­stan­tial num­bers of our pa­tients would have had to give up their cov­er­age,” said Dr. J. Mario Molina, CEO of Molina Healthcare, a pub­licly traded in­sur­ance com­pany with 266,000 ex­change plan mem­bers in nine states. Most are in Florida, which uses the fed­eral ex­change.

The loss of the sub­si­dies would have hurt some in­sur­ers more than oth­ers. Provider-owned and re­gional plans and not-for-profit co-op plans cre­ated by the ACA cover many low-in­come peo­ple who have pre­mium sub­si­dies.

“This rul­ing may pre­vent some fam­i­lies from hav­ing to make the in­tol­er­a­ble de­ci­sion be­tween med­i­cal care or food and shel­ter,” ac­cord­ing to a writ­ten state­ment from Land of Lin­coln Health, a co-op in­surer in Illi­nois. The fi­nances of many co-op plans, cre­ated by the ACA to foster greater com­peti- tion in the in­sur­ance mar­ket, al­ready are shaky. Los­ing tens of thou­sands of cus­tomers be­cause of sub­sidy cut­offs could have sent them into a tail­spin.

Health Care Ser­vice Corp., a Blue Cross and Blue Shield com­pany that of­fers ex­change plans in five states, said the King rul­ing al­lows it to “re­main fo­cused on pro­vid­ing an ar­ray of af­ford­able prod­ucts and ser­vices.”

Aetna, An­them, Hu­mana and the other na­tional for-profit in­sur­ers had some stake in the con­tin­u­a­tion of the sub­si­dies be­cause they of­fer ex­change plans in states us­ing the fed­eral mar­ket­place. The rul­ing may prompt them to ramp up their ex­change busi­ness.

Now, in­sur­ers will have to fo­cus on ways to im­prove and sta­bi­lize the in­di­vid­ual and small-group mar­kets. Some car­ri­ers have re­quested hefty pre­mium in­creases for 2016, though a Kaiser Fam­ily Foun­da­tion anal­y­sis found that 2016 rate re­quests are up only mod­estly over 2015. In­sur­ers used a full year’s worth of ex­change plan data for their 2016 rate fil­ings. Some found that med­i­cal claims were high for a sig­nif­i­cant por­tion of en­rollees.

Ex­perts agree that the greater cer­tainty of ACA pre­mium sub­si­dies con­tin­u­ing bodes well for fu­ture rate plan­ning. “This is good for rates,” said Mike Mas­colo, a na­tional em­ployee-ben­e­fits prac­tice leader at Wells Fargo. “That’s go­ing to ex­pand the risk pool and bring in both healthy and un­healthy peo­ple.”

But in­sur­ers still may need a few more years be­fore they feel com­fort­able that their rate cal­cu­la­tions are ac­tu­ar­i­ally sound. “Ev­ery­one’s ad­just­ing to the new pro­gram and the shift­ing dy­nam­ics, and we’re still not at the steady equi­lib­rium of en­roll­ment and premi­ums,” said Cori Uc­cello, se­nior health fel­low at the Amer­i­can Academy of Ac­tu­ar­ies. “There’s still some un­cer­tainty in the rate de­vel­op­ment process.”

With the le­gal case on sub­si­dies set­tled, elected of­fi­cials and con­sumer groups will be push­ing state reg­u­la­tors to keep pres­sure on in­sur­ers to mod­er­ate premi­ums, said Bri­etta Clark, a health law pro­fes­sor at Loy­ola Mary­mount Univer­sity in Los An­ge­les. “This re­quires con­tin­ued vig­i­lance and con­tin­u­ally look­ing at what’s hap­pen­ing at the mar­ket,” she said.

“If the sub­si­dies had not been up­held, sub­stan­tial num­bers of our pa­tients would have had to give up their cov­er­age.”

DR. J. MARIO MOLINA

CEO, MOLINA HEALTHCARE

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