Obamacare Premiums Estimated to Rise 10 to 20 Percent in 2018

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By Sara Hansard

Obamacare premiums may increase by at least 10 percent to 20 percent in 2018, according to an actuarial leader.

That doesn’t include premium increases that could result if cost-sharing reduction (CSR) subsidies are not funded, Dave Dillon, a fellow with the Society of Actuaries, told Bloomberg BNA April 18. Dillon said if the cost-sharing subsidies— estimated by the Congressional Budget Office recently at $7 billion in fiscal 2017 and $10 billion in fiscal 2018—are not funded, “There will be carriers that will consider leaving the market rather than passing through a large rate increase.” Dillon is vice president and principal in the Dallas office of actuarial consulting firm Lewis & Ellis Inc.

It isn’t yet clear whether insurers will request large premium increases for 2018 as they did in 2017; funding the cost-sharing subsidies is the top issue for them. Without the government payments, premiums could spike at least 20 percent just to cover them, Karen Bender, chairperson of the American Academy of Actuaries’ individual and small group medical committee, estimates.

Dillon based his estimate after reviewing 2016 financial statements that all fully funded health insurance plans filed with state insurance regulators March 1. Those filings showed carriers’ claims paid and premiums received, to arrive at a loss ratio reported by plans. The Affordable Care Act requires plans to make refunds to consumers in some cases based on a slightly different definition of the medical loss ratio.

Medical Inflation 6 to 10 Percent

Medical inflation is expected to be between 6 and 10 percent for 2018, which is “the typical annual trend” for health-care costs, Dillon said. But there will be “some downward pressure as a result of the market stabilization rule” published April 18 by the Department of Health and Human Services.

It isn’t clear how a lack of cost-sharing funding for low-income exchange enrollees would affect individual carriers, Dillon said. That is “highly dependent on each carrier and their population,” he said. The 10 to 20 percent increase doesn’t include increases that might be requested if the cost-sharing subsidies aren’t funded, he said.

In addition, the 10 percent to 20 percent estimate doesn’t take into account increases if Congress doesn’t delay the ACA health insurance fee for 2018, Dillon said. The fee, which is to be paid by insurers and estimated to add 2 to 3 percent to the cost of premiums, was waived for 2017 but is in effect for 2018, he said.

The deadlines for filing rates vary among states, with some filings due shortly and others not due until July, Dillon said. A federal deadline of June 21 applies to some filings, he said.

Most Carriers Likely to File Rates

Most carriers are likely to file rates for 2018, but they will have until the fall to assess whether to participate in the exchanges, Dillon said.

UnitedHealth Group Inc., Aetna Inc. and Humana Inc. have pulled back substantially from the ACA marketplaces, and Wellmark Inc. recently announced it won’t be in the Obamacare markets in Iowa in 2018.

A survey released April 17 by management consulting firm Oliver Wyman found that 96 percent of 24 responding health plans participating in the 2017 ACA exchanges were planning to participate in 2018. Most insurers that have decided to leave the exchanges have already made those decisions, Beth Fritchen, an author of the study, told Bloomberg BNA April 19.

“A lot are going through process, developing rates, with the intention that they’re going to participate,” said Fritchen, a partner in Oliver Wyman’s Chicago office. If the situation changes, “they can change their minds” later, she said.

Waiting for More Information

The 2018 rate increases indicated by the carriers in the Oliver Wyman survey were also between 10 and 20 percent, with some planning to ask for increases above that, Fritchen said.

But only half of the carriers surveyed by Oliver Wyman “had an idea of rate increases at this time,” Fritchen said. Many of the plans are waiting to get more claims information for 2017 before trying to set 2018 rates, she said.

Many of the carriers surveyed intend to stay in the same geographic areas that they are participating in for 2017, with a few planning to decrease their areas and a few looking to increase their areas, Fritchen said.

2018 Increases Higher Than Expected

The 2018 rate increases are shaping up to be “higher than we originally expected,” James Sung, associate director of insurance ratings for S&P Global Ratings, told Bloomberg BNA April 19.

An S&P Global Ratings report released April 7 found that “2016 was a marked improvement for most U.S. Blue Cross Blue Shield (Blues) insurers’ operating performance in the Affordable Care Act (ACA) individual market.” But, the report said, “profitability is still a couple of years away.”

“It’s really the uncertainty” of whether the cost-sharing subsidies will be funded, or whether the ACA will be repealed that is leading to the possibility of higher-than-expected rate increases for 2018, Sung said.

The cost-sharing subsidy issue “is still in the background,” Sung said. “There’s going to be a significant risk factor built into the rates for 2018" because of uncertainty over the funding, he said.

To contact the reporter on this story: Sara Hansard in Washington at shansard@bna.com

To contact the editor responsible for this story: Brian Broderick at bbroderick@bna.com

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