Large rate hikes, Aetna’s exit sig­nal big changes for in­di­vid­ual mar­ket

Modern Healthcare - - NEWS - By Shelby Liv­ingston

As un­cer­tainty swirls around the fate of the Af­ford­able Care Act, con­sumers are likely to face fewer in­sur­ance op­tions and higher costs in 2018.

Aetna last week an­nounced that it will stop sell­ing in­di­vid­ual in­sur­ance plans on and off the ACA in­sur­ance ex­changes in Ne­braska and Delaware in 2018. Cou­pled with an ear­lier an­nounce­ment that it was drop­ping out of the ex­changes in Iowa and Vir­ginia, Aetna will com­pletely with­draw from the ACA mar­ket­place next year.

On top of Aetna’s re­treat, in­sur­ers are start­ing to ask state reg­u­la­tors to ap­prove large rate in­creases for 2018 in­di­vid­ual poli­cies, in part be­cause they don’t yet know if the Trump ad­min­is­tra­tion plans to help or hurt the ACA’s health in­sur­ance ex­changes. In the three states that pub­lished re­quested rates last week, in­sur­ers sought dou­ble-digit hikes, some ex­ceed­ing 50%.

“There are warn­ing signs here,” said Joel Ario, for­mer direc­tor of HHS’ of­fice of health in­sur­ance ex­changes and a man­ag­ing direc­tor at con­sul­tancy Manatt Health. “We still need some mar­ket sta­bi­liza­tion. We are still not out of the woods.”

Con­necti­cut, Mary­land and Vir­ginia have re­leased the rates filed by health in­sur­ers for 2018 in­di­vid­ual plans. In Con­necti­cut, where there are just two in­sur­ers sell­ing in­di­vid­ual plans next year, rate in­creases range from 15% to 34%. Most of Vir­ginia’s health in­sur­ers asked to hike rates by dou­ble dig­its, with one re­quest­ing a more than 50% rate in­crease. In Mary­land, rate in­creases range from 18% to nearly 60%.

The big rate re­quests in these three states of­fer a glimpse into what in­sur­ers may be plan­ning in the rest of the coun­try. “These states are show­ing con­sis­tently big premium in­creases, and it does point to the like­li­hood we’ll see that in other states as well,” said Larry Le­vitt, se­nior vice pres­i­dent of the Kaiser Fam­ily Foun­da­tion.

Health in­sur­ers asked for big rate in­creases for myr­iad rea­sons, but in most cases the ques­tion driv­ing a sig­nif­i­cant por­tion of the rate hikes is whether key Oba­macare-era pro­vi­sions will re­main in play in 2018. Those pro­vi­sions in­clude the in­di­vid­ual man­date penalty that drives peo­ple to en­roll in cov­er­age and the cost-shar­ing re­duc­tion sub­si­dies that help low-in­come mem­bers af­ford the cov­er­age.

The same per­va­sive un­cer­tainty over the fu­ture of the in­di­vid­ual mar­ket led sev­eral states to ex­tend the dead­lines for in­sur­ers to file 2018 rates in hopes that an ex­tra few weeks to price plans would be enough to ease the in­sur­ance in­dus­try’s jit­ters over re­peal-and-re­place ef­forts and keep them from bail­ing on the ex­changes.

Un­cer­tainty isn’t the sole rea­son rates are go­ing up. In­sur­ers said the pool of in­di­vid­ual plan mem­bers is grow­ing sicker be­cause fewer healthy mem­bers are sign­ing up for cov­er­age. En­roll­ment in the ACA’s in­sur­ance ex­changes dropped to 12.2 mil­lion this year, down from 12.7 mil­lion in 2016. The re­turn of the health in­surer tax, and the fail­ure of ACA pro­grams meant to help in­sur­ers mit­i­gate risk also helped in­crease rates.

Aetna blamed fi­nan­cial losses for its de­ci­sion to pull out of the ex­changes, say­ing it ex­pects to lose $200 mil­lion on in­di­vid­ual plans this year. It in­sures just 255,000 mem­bers in the in­di­vid­ual mar­ket. The in­surer said it lost $450 mil­lion in 2016, when it in­sured 964,000 in­di­vid­ual ACA mem­bers. Aetna’s 2016 rev­enue to­taled $60.2 bil­lion, while its profit was $2.3 bil­lion.

Still, un­cer­tainty ap­pears to be the big­gest driver. Health in­sur­ance ac­tu­ar­ies build rates by es­ti­mat­ing claims costs and ad­min­is­tra­tive ex­penses, and then they tack on a profit mar­gin, ex­plained Rick Di­a­mond, a for­mer ac­tu­ary with the Maine Bureau of In­sur­ance who is now a con­sul­tant.

It’s much more dif­fi­cult for an ac­tu­ary to make those as­sump­tions when the rules of the mar­ket could change at any time, Di­a­mond said, so in­sur­ers will “err on the side of cau­tion and make sure they don’t lose their shirts.”

In Mary­land, in­surer Ev-

Cou­pled with an ear­lier an­nounce­ment to aban­don ex­changes in Iowa and Vir­ginia, Aetna will com­pletely with­draw from the ACA mar­ket­place next year.

er­green Health—the failed co-op that res­ur­rected it­self as a for-profit in­surer— asked for a 27.8% av­er­age rate in­crease for in­di­vid­ual plans on and off the state’s ex­change. About half of that hike is driven by un­cer­tainty over the fu­ture fund­ing for cost-shar­ing re­duc­tion pay­ments, en­force­ment of the penalty for not hav­ing in­sur­ance, and losses from the ACA’s risk ad­just­ment pro­gram, CEO Dr. Peter Beilen­son said. Ris­ing med­i­cal costs ac­count for part of the in­crease, but that isn’t the driv­ing fac­tor, he said.

In­sur­ers are more con­cerned about whether the Trump ad­min­is­tra­tion plans to en­force the in­di­vid­ual man­date, he said. Ev­er­green’s rates are about half that of its com­peti­tor CareFirst’s, so Beilen­son said he ex­pects to at­tract a larger share of the in­di­vid­ual mar­ket than in years be­fore. Ev­er­green isn’t sell­ing in­di­vid­ual plans in 2017. In 2016, it in­sured 12,000 in­di­vid­ual mem­bers. It ex­pects to cover be­tween 5,000 and 7,500 in 2018.

If the penalty isn’t en­forced, or if the Trump ad­min­is­tra­tion again de­cides not to sup­port ex­change en­roll­ment through ad­ver­tise­ments, “our hy­poth­e­sis is there will be a sig­nif­i­cantly lower num­ber of peo­ple join­ing the ex­changes … and they will be sicker,” Beilen­son said. That’s be­cause young, healthy peo­ple will be more likely to drop in­sur­ance, while the sick­est, costli­est mem­bers will re­main.

CareFirst, a Blue Cross and Blue Shield com­pany, asked for a 52% in­crease on av­er­age in its Mary­land in­di­vid­ual plans, both on and off the ex­change. It is also seek­ing hikes of 35% in North­ern Vir­ginia and 29% in Wash­ing­ton, D.C. CareFirst, which ex­pects cu­mu­la­tive losses on its ACA plans to reach $600 mil­lion this year, cov­ers about 215,000 in­di­vid­ual mem­bers in those three ar­eas.

The not-for-profit in­sur­ance com­pany’s CEO, Chet Bur­rell, said the rates re­flect that the pool of mem­bers en­rolled in its ACA plans is grow­ing sicker be­cause fewer healthy peo­ple have signed up for cov­er­age. Ev­er­green hiked pre­mi­ums fur­ther be­cause it be­lieves the Trump ad­min­is­tra­tion won’t en­force the in­di­vid­ual man­date penalty in 2018, which will worsen the prob­lem as young peo­ple drop in­sur­ance, Bur­rell said.

En­forc­ing the man­date “is the sin­gle most crit­i­cal ac­tion,” Bur­rell said, adding that CareFirst would con­sider re­duc­ing its rate hike re­quests if “there was a clear and com­pelling state­ment made by the ad­min­is­tra­tion that it would en­force the in­di­vid­ual man­date,” or if the CMS paid the more than $8 bil­lion it owes in­sur­ers in risk-cor­ri­dor pay­ments.

CareFirst and Ev­er­green both as­sumed the cost-shar­ing sub­si­dies would con­tinue to be funded, but CareFirst said it would bump up its rates as much as 10% to 15% if the fed­eral gov­ern­ment de­cides not to make the pay­ments that help lower in­come en­rollees af­ford cov­er­age.

Na­tional in­surer Anthem, which cov­ers 1.6 mil­lion in­di­vid­u­als across sev­eral states on and off the ACA’s ex­changes, re­quested av­er­age rate hikes in 2018 of 33.8% in Con­necti­cut and 37.7% in Vir­ginia. For 2017, Anthem asked for a 26.7% av­er­age in­crease on in­di­vid­ual plans in Con­necti­cut, and the state even­tu­ally ap­proved a 22.4% in­crease. In Vir­ginia, Anthem’s rates rose 15.6% on av­er­age in 2017.

“The dy­nam­ics and level of volatil­ity” in the in­di­vid­ual mar­ket are driv­ing Anthem’s steep rate in­creases, a com­pany spokes­woman said in a state­ment. The ris­ing cost of med­i­cal ser­vices and higher phar­macy ex­penses were also fac­tors.

In­sur­ers’ pro­posed rates will change as state in­sur­ance reg­u­la­tors re­view them in the com­ing months. Some will go down, and some may go up, de­pend­ing on how ag­gres­sive a state’s in­sur­ance com­mis­sioner is, Di­a­mond said.

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