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 Evergreen 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 exchange. It is also requesting 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.
