Without Congressional intervention, insurance companies indicate that insurance premiums will rise again in 2019. Insurers only have until summer to decide if they will continue to participate in the insurance marketplace, and many claim they are suffering significant losses due to coverage of Americans with greater medical needs.
Death Spiral
Chet Burrell, CEO of CareFirst Blue Cross and Blue Shield, has warned that the marketplaces are in a death spiral over the last two years. He now claims that the situation is significantly worse than he anticipated. Burrell, who plans to retire this year, claims that CareFirst, which covers more than 215,000 people in the Mid-Atlantic region, has lost almost $600 million since the launch of the marketplaces in 2014. This amount is approximately six percent of CareFirst’s business. CareFirst is among the insurance companies most loyal to the exchanges, continuing to provide coverage when other companies have pulled from the marketplaces.
Bare Bones Plans
One issue facing insurers is the repeal of the individual mandate as part of the tax reduction legislation passed in 2017 as well as a push from the Trump administration to allow people to purchase bare-bones health insurance plans. These two factors could lead to healthy people withdrawing from traditional marketplace plans in order to get cheaper premiums with less coverage. If this happens, Americans who need more comprehensive coverage – typically those with pre-existing conditions that require greater care – would be forced into a more expensive risk pool on the marketplace. Without premiums from healthier people who don’t need as much medical care, insurance carriers would be forced to raise rates again.
PPOs May See Highest Rise in Premium
According to Burrell, premiums for Preferred Provider Organization (PPO) plans will see the highest rise in premiums. People with chronic conditions or serious illnesses typically choose PPO plans because these plans cover broader networks, including specialists. Because sicker people tend to flock to PPOs, premiums for these plan types are likely to rise as the risk pool loses healthy enrollees to short-term or alternative health plans. Health Maintenance Organizations (HMOs) may not see premiums rise as much since they tend to attract healthier customers who have little need to visit doctors outside of a network.
State Assistance
In some states, like Maryland, insurance companies with heavy losses may be compensated for those losses. Maryland Governor Larry Hogan signed a bill in April that grants compensation to insurance companies. The bill would use $380 million in taxes. The measure was designed when insurance companies informed the state that premiums could rise as much as 50 percent without government intervention. With the passage of the bill, CareFirst premiums will actually decrease in Maryland between 20 and 30 percent. Insurers had hoped that Congress would pass measures in the omnibus spending bill passed in March that would address some of the issues causing the rise in premium, but they did not.
Bipartisan Fixes
Insurance experts say that authorizing cost-sharing reduction payments or creating a reinsurance program, both ideas with bipartisan support, could help stabilize premiums. Had those provisions been passed in the omnibus bill, the Congressional Budget Office estimated that premiums would decrease by 10 percent in 2019 and could drop by 20 percent in 2020 and 2021. Instead, some industry leaders accused Congress of “shifting into campaign mode” and ignoring the concerns of insurance companies.
Unsubsidized Policies to Be Hit Hardest
In a report issued by Covered California, the roughly 6 million Americans who purchase insurance through the individual market and are not subsidized by the government will bear the brunt of increased premiums. People who purchase insurance from the subsidized markets are largely protected from premium increases. The majority of these Americans purchase insurance through the off-exchange market, which means they purchase ACA-compliant plans directly from a company. In 2018, there were 5 percent fewer enrollments than in 2017. Those who did sign up tended to be less healthy. It is unclear what led to the reduced number of signups, although a reduction in advertising and the prospect of eliminating the individual mandate may have played a role.
There are still several changes that could be made at the federal level that may circumvent higher premiums in 2019. Funding high-risk pools or reinsurance programs at the state level could reduce premiums by 12 percent. Restoring funding to market the insurance marketplace could encourage signups of healthy people, which could lower premiums as much as 4 percent. Insurance companies also say that reinstituting tax penalties could lower rates by as much as 3 percent and would help the people whose premiums are not subsidized.
