First clues portend steep hikes, wide variation in 2019 individual rates
After a year of sizable rate hikes, industry observers are watching carefully how insurers react to a spate of policy changes aimed at reshaping the individual market.
Rates filed in Maryland and Virginia—the first two states to announce insurers’ plans for 2019— offer a glimpse at just how high premiums could rise.
Although the requests could change before open enrollment in November, two trends are emerging: rate hikes will be big, but likely not as steep as the sticker-shock rate requests of 2018. And again, there will be wide swings across states and plans.
The rates are the first announced since the Trump administration moved to zero-out the individual mandate penalty and proposed expanding access to cheaper, skimpy insurance policies.
“There’s going to be more variation than ever because states are starting to have more choices in how they respond to federal flexibility,” said Joel Ario, managing director of Manatt Health and former Pennsylvania insurance commissioner. Some states, including Maryland, are moving to set up reinsurance programs to help bring down high premiums, for instance.
In Virginia, the eight health plans slated to offer individual coverage requested a wide range of 2019 rate increases for on- and off-exchange plans, but most requests were lower than the approved rates last year.
The requested rates range from a decrease of 1.9% by Optima Health Plan to a
64.3% increase by CareFirst subsidiary Group Hospitalization and Medical Services. For 2018 coverage, Virginia regulators approved an 81.8% rate hike for Optima and 67.4% for CareFirst.
Meanwhile, Maryland’s two insurers asked regulators for an average rate increase of 30.2% for individual coverage, a monthly premium of $592. That compares with an average approved rate request of 43.9% for 2018 coverage. In that state, Kaiser Foundation Health Plan filed to raise rates by 37.4%, while CareFirst’s Group Hospitalization subsidiary requested a rate increase of 91.4% for its smaller group of PPO members. CareFirst BlueChoice, which insures 58% of Maryland’s market, requested a hike of 18.5% for HMO members.
By comparison, Kaiser’s rates rose 36.3% in 2018. CareFirst’s Hospitalization plan increased rates by 53.6% and its Blue Choice plan by 45.3%.
Exactly how much of an impact the zeroed-out individual mandate penalty—effective in 2019—and proposed rules to expand access to short-term health plans and association health plans have on rate increases largely depends on whether insurance actuaries believe those factors will disrupt an insurer’s group of members.
Cigna CEO David Cordani, for instance, said the mandate penalty won’t be a huge driver of rate increases because it has “proven to be more porous in reality” than how it was initially imagined. Cigna requested a 15% rate increase in Virginia.
CareFirst CEO Chet Burrell also said that the pool of people enrolling is becoming sicker. “The rates, as high as they’ve been and as steeply as they have increased, have not kept up with how costly it is to take care of people who are as sick as the population involved,” Burrell said. The repeal of the individual mandate penalty will only worsen that trend, he said. About 5% of CareFirst’s requested rate hikes were attributed to lack of the individual mandate penalty, according to the state.
The Trump administration’s decision to end cost-sharing reduction payments, which lower copayments and deductibles for people with incomes below 250% of the poverty level, drove price increases for 2018, tacking on an extra 20% to rates. But the absence of CSR funding is unlikely to affect rates this year because insurers already accounted for that, actuaries said.
The smaller rate increases also indicate that the market may be stabilizing, said Nick Ortner, a consulting actuary with Milliman. Even so, rates are high, particularly for unsubsidized consumers who will feel the full brunt of the hikes. Maryland Insurance Commissioner Al Redmer said the proposed rates could come down if the federal government approves the state’s soon-to-be-submitted application for a 1332 waiver and reinsurance program to subsidize claims of highcost patients.
Burrell projected that rates would be reduced by as much as 20% to 30% if a reinsurance program is approved.