The era of annual eye-popping Obamacare rate hikes appears to be over.
Premium increases in the law’s marketplaces are on track to be relatively modest for the second straight year, according to the first batch of 2020 rates proposed by insurers. The rate filings are an early indication that this year’s small rate hikes weren’t a fluke and that other Trump administration policies — including support for a lawsuit that could torch the Affordable Care Act — have proven less disruptive than some experts feared.
“It seems like things have stabilized,” said James Whisler, a principal with Deloitte Consulting who works with insurers on rate setting.
Fewer than a dozen states have so far released initial proposed rate hikes for the enrollment season starting in November. They range from an average increase of 13 percent in Vermont to average reductions of 2.9 percent in Maryland. Insurers in New York are seeking rate hikes of 8.4 percent; Washington’s health plans want to boost premiums by less than 1 percent.
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The proposed rates are likely to get pushback from insurance regulators in many states, meaning that actual 2020 premium increases could be lower when they’re finalized shortly before open enrollment begins.
This past year, for the first time since the marketplaces were established in 2014, premiums for the popular benchmark plans — which are used to establish subsidies — dipped by 1.5 percent in the 39 states relying on HealthCare.gov. In addition, enrollment largely held steady, dropping 2.6 percent nationwide, despite widespread concerns about the Trump administration’s cuts to outreach and marketing efforts.
One big reason why the Obamacare marketplaces have settled: Insurers are now making lots of money on their Obamacare customers — the vast majority of which are heavily subsidized — after jacking up rates to account for higher-than-expected medical costs in the early years.
In addition, the administration’s looser rules for selling plans that don’t meet ACA requirements don’t appear to have had a major impact almost a year after they were finalized. The insurance industry’s muted response to rules expanding short-term and association health plans shows that the Obamacare markets have matured, experts said.
“If it was four years ago and everything was on fire, [insurers] would … definitely try to get every 0.5 to 1 percent increase they need,” said Dave Dillon, a fellow with the Society of Actuaries who advises several states on rate review. “I don’t really see explicit assumptions for those items.”
Still, it’s too soon to gauge the level of competition among insurers for 2020. Two years ago, there were dozens of counties across the country in danger of not having any Obamacare options, although insurers eventually stepped in to sell coverage. But competition ticked up in 2019, and most market watchers expect that to continue for next year.
“I would be surprised if we start hearing about bare counties,” said Cynthia Cox, an insurance expert at the Kaiser Family Foundation. “It’s probably more likely that we see insurers entering the market.”
The main driver of rates in 2020 will be increased medical costs, which are expected to swell by 4 to 8 percent. There are a few minor changes in federal policies that will affect rates around the margins. Most notably, the ACA’s health insurance tax kicks back in after a one-year hiatus, which will boost premiums by around 2 percent.
The relative stability in the ACA markets means that insurers are focused more on tweaking plan design, including scrutinizing their networks to see if there are ways to reduce costs by trimming providers without risking backlash, said Deloitte’s Whisler. In addition, they’re focused on boosting their ability to document exactly how expensive their customers are so that they can get their fair share of risk adjustment payments. Under that program, insurers that attract the most expensive customers receive payments, while those that attract a healthier clientele have to cut checks.
“That is a zero-sum game,” Whisler said. “There’s really large checks being written or received.”
Obamacare insurers are still anxious about steps the Trump administration could take to undermine the markets. HHS has sought input on whether it should prohibit “silver-loading,” in which insurers pack the rate increases caused by the administration’s 2017 decision to eliminate cost-sharing reduction payments onto the most popular ACA plans. That increased the size of premium subsidies, allowing more people to sign up for plans with low or no monthly costs.
The biggest potential land mine, however, remains the lawsuit filed by conservative states seeking to dismantle the entire ACA. In December, a federal judge ruled that the removal of the individual mandate in the 2017 GOP tax cut legislation rendered the entire federal health care law unconstitutional. Most legal observers expect that decision to be overturned on appeal, but the Trump administration raised the threat level in March by backing the lower court ruling. A federal appeals court in New Orleans will hear the case in July, and it could reach the Supreme Court next term.
The ramifications of that lawsuit succeeding would be so profound — the ACA marketplaces could be invalidated in an instant — that there’s little insurers can do to account for that possibility in their 2020 filings, experts said.
“I would be hopeful that there would be some kind of transition period” if the ACA is ultimately overturned, Dillon said. “The markets would be in an uproar.”
Date: June 12, 2019