With no fix in omnibus budget bill, insurers set to hike premiums, rethink selling individual plans

In a blow to health insurers, the House on Thursday passed a $1.3 trillion, two-year omnibus spending bill that didn't include funding for cost-sharing reduction payments or a federal reinsurance program. Insurers had been lobbying hard to get something included in the massive spending bill. Absent that lifeline, insurers will likely be raising premiums and rethinking their participation in the individual market in 2019.

The omnibus bill, which the Senate must pass by midnight on Friday to avoid a government shutdown, marks what most feel was a final shot at passing measures to bring down premiums in the individual market before plans must decide where to sell and how to price coverage next year.

The industry's dominant lobbying group, America's Health Insurance Plans, and the Alliance for Community Health Plans, which represents not-for-profit insurers, are regrouping after the loss.

"We're discouraged at the moment, but we're not giving up quite yet," ACHP CEO Ceci Connolly said, adding there's still a chance that stabilization measures could be added as an amendment to the spending bill. "We are disheartened to see efforts to make this suddenly about stock prices or profits … This is a conversation about premiums for 2019, and it's for working families."

A $30 billion reinsurance program—health insurers' top priority—was dropped from the spending bill along with funding for cost-sharing reduction payments on Monday. That came despite bipartisan support for the package after lawmakers on both sides disagreed over policy demands from the Trump administration, including the auto-renewal of short-term plans and applying anti-abortion language to the cost-sharing payments.

Without a federal reinsurance program that would have helped subsidize care for high-cost plan members, some health insurers could hike premiums further or exit the individual market altogether.

"Failure to stabilize the individual market further raises health insurance costs for Americans who purchase their own coverage," said Daniel Hilferty, president and CEO of Independence Blue Cross. "Premiums should be more affordable, which is why reinsurance as well as cost-sharing reduction payments for middle-class families are absolutely critical."

John Baackes, CEO of LA Care Health Plan, which tripled its individual market enrollment in 2018 to 76,000 paid customers, said reinsurance is especially important for counties or states with only one insurer.

"The reinsurance fund was a safety valve. Without that, they are going to have more plans dropping out," Baackes said.

Zeroing out the individual mandate penalty will cause insurers to raise rates, and funding for cost-sharing payments could have helped blunt those premium increases for some consumers, Baackes said.

Joel Ario, managing director of Manatt Health and former director of HHS' Office of Health Insurance Exchanges, agreed that funding for a reinsurance program would have sent a positive signal to insurers participating in the individual market. But he said many plans that raised premiums for 2018 to account for the loss of the cost-sharing payments are now profitable, which means they're more likely to keep selling plans.

"They are starting from a better position on the balance sheet, so I'm still hopeful we'll have good participation in ACA-compliant market," Ario said.

On the other hand, some experts insist that the individual health insurance market is better off without funding for cost-sharing reduction payments and reinsurance. They say consumers, particularly ones that receive subsidies, would have ended up paying more if the federal government resumed paying cost-sharing subsidies.

When the Trump administration halted cost-sharing reduction payments in October, insurers and state regulators in many states responded by raising premiums for silver-level exchange plans only, which in turn boosted the size of the premium tax credits that the majority of exchange enrollees received, insulating them from the premium hikes. Other consumers were about to get 2018 gold-level plans at a cost similar or lower than the silver plan, or a bronze-level plan with no premium.

Funding the cost-sharing reduction payments would reverse that trend, sending the price of gold and bronze-level plans higher and causing confusion for customers who had switched to those plans in 2018. Reinsurance funding, on the other hand, could have reduced premiums by an average of 10%, according to the Congressional Budget Office. While that would have benefited enrollees ineligible for federal financial assistance, it wouldn't have much effect on subsidized customers.

Matthew Fiedler, a fellow at the Brookings Institution, said the stabilization package would have had little effect on whether or not health insurers chose to play ball in the individual market in 2019.

"Insurers participate when they think they can make money doing so, and this package wouldn't have affected their ability to be profitable in this market," Fiedler said. "Adjusting prices appropriately to reflect whether there's a reinsurance program of CSR payments is relatively straightforward."

Insurers already found a way to adjust their premiums to account for the absence of cost-sharing reduction payments. They hiked 2018 rates by an average of 20% strictly to account for those missing payments. Several analyses, including one published this week by the White House Council of Economic Advisers, found that though insurers struggled financially in the first few years of the ACA exchanges, most are now breaking even or making a profit in the individual market.

What may be of more concern at this point is the potential proliferation of plans that skirt ACA rules in 2019. Proposed rules would expand access to short-term health plans and association plans that don't offer many of the consumer protections required by the ACA. Enrollment in noncompliant plans, along with the zeroing out of the individual mandate penalty at the end of last year, create uncertainty in what the risk pool will look like in 2019. It's likely healthy people will be siphoned out of the individual market, leaving behind the sickest, costliest and most heavily subsidized consumers.

"You could see some insurers saying: I don't know how to price for this market. I'll come back when the dust settles," Fiedler said.