Health insurance premiums may still rise in 2019 even if Congress funds the cost-sharing subsidies for low-income Obamacare enrollees as envisioned, health-care policy analysts say.
Federal funding of the subsidies that health insurers are required to provide to Affordable Care Act enrollees with incomes between 100 percent and 250 percent of the poverty level “will help for the nonsubsidized premiums,” Deep Banerjee, director of health insurance ratings for S&P Global Ratings, told Bloomberg Law Dec. 19. Still, individual market premiums are expected to rise in 2019 if the Tax Cuts and Jobs Act (H.R. 1) is enacted because the bill would eliminate the ACA’s mandate that most people have qualified coverage or pay a fine, he said.
Funding the cost-sharing reduction (CSR) subsidies, which the Trump administration discontinued Oct. 12, has been a major sticking point among Republicans in their efforts to get their tax bill passed. Premiums were raised an estimated 20 percent on average for 2018 to cover the loss of the payments, but ACA supporters argue that restoring them won’t be enough to reduce premiums much in 2019 because the tax bill guts the mandate by eliminating the penalty for not having coverage.
The Congressional Budget Office estimated the cost-sharing payments for 2018 and 2019 to total $18 billion. About 6 million people with incomes from 100 percent to 250 percent of the poverty level receive the subsidies for plans bought on the exchanges. For 2017, about 12.2 million people enrolled in the exchanges.
Mississippi Expects 2019 Cut
However, Mississippi Insurance Commissioner Mike Chaney told Bloomberg Law that he expects premiums to drop sharply in 2019 if the cost-sharing reduction subsidies are funded by Congress.
The insurer Ambetter From Magnolia Inc., which is owned by Centene Corp. and is Mississippi’s only ACA exchange carrier, raised its premiums by 47.3 percent for 2018, but the rates would likely have gone up 21 percent to 22 percent if the CSRs had been funded, he said. Mississippi has about 60,000 enrollees in its ACA exchange.
The cost-sharing reduction subsidies would be funded for 2019 and 2020 under a government funding bill Congress is expected to vote on Dec. 22. If the subsidy payments to insurers resume in 2019, premiums should drop by 25 percent to 30 percent for that year, Chaney said. The company would have to reduce premiums under the ACA’s medical loss ratio (MLR) provision, which requires plans to spend at least 80 percent of premiums on medical claims or quality improvements, or rebate the difference to consumers, he said.
“If CSRs are restored, then there will be refunds down the road, or [the Centers for Medicare & Medicaid Services] may grant a reduction in premiums during the 2018 year,” Chaney told Bloomberg Law in an email Dec. 19. However, since rates have already been set for 2018 and open enrollment ended Dec. 15, it would be difficult for states to change the rates.
Most of the increases attributable to the loss of CSR payments were added to silver-tier plans. More than 80 percent of ACA enrollees receive tax credit subsidies to help cover the cost of premiums, and those premium tax credits are based on the second-lowest-cost silver plan. That increased subsidy payments to states.
Sen. Alexander’s ‘Christmas Present’
Sen. Lamar Alexander (R-Tenn.), chairman of the Senate Committee on Health, Education, Labor and Pensions, told reporters Dec. 18 that the Bipartisan Health Care Stabilization Act he proposed with HELP Committee ranking member Patty Murray (D-Wash.) will drop premiums by 18 percent. He called it a “Christmas present.”
However, Murray said funding the CSRs “doesn’t come close to solving the problem created by this tax bill,” because the end of the mandate will drive up premiums.
“Defunding of CSRs was the biggest factor in insurers increasing their pricing [in 2018], but it wasn’t the only factor,” according to Sarah Lueck, a senior policy analyst with the Center on Budget and Policy Priorities, a nonpartisan research institute that advocates for low- and moderate-income people concerning budget and tax issues.
“You have these other factors, like the mandate, that play as well,” Lueck said.
Legislation put forward by Sen. Susan Collins (R-Maine) that would provide federal funding for reinsurance to cover people with high-cost claims would also help reduce rates, Lueck said.
Won’t Offset Mandate Repeal
Funding the CSRs “is not expected to go far enough to undo the damage of the individual mandate repeal,” JoAnn Volk, a research professor at Georgetown University’s Center on Health Insurance Reforms, told Bloomberg Law Dec. 18. Health insurers argue that without a mandate to encourage people to buy health insurance in the individual market, only people with medical problems will get insurance, which would push up claims costs and premiums.
In addition to the possible removal of mandate penalties, other factors may push up premiums in 2019, Volk said. The Trump administration cut outreach funding for open enrollment, which was only six weeks for 2018, about half the length of previous open enrollments. As many as 1 million fewer people could sign up for 2018, according to estimates.
If enrollment for 2018 is poor, that could lead to a sicker risk pool and higher medical claims, Volk said. That in turn would be reflected in 2019 rate filings.
Premiums climbed more than 20 percent on average for 2017, and rates are rising by about the same amount for 2018.
Medical Loss Ratio
The MLR may help reduce premiums, but it is based on a three-year average, Volk said. Many insurers have experienced losses in the exchanges, causing major carriers such as UnitedHealth Group Inc., Aetna Inc., and the Cigna Corp. to withdraw from the markets.
“There are more forces I think to drive up premiums than would lower them” in 2019, even with CSR funding, Volk said.
If the CSRs are funded, “you would see the silver plan premiums reduced,” Greg Fann, senior consulting actuary with Murrieta, Calif.-based health actuary consulting firm Axene Health Partners LLC, told Bloomberg Law Dec. 18.
Good Deals Reduced for Subsidized
But funding the CSRs for 2019 “will reduce the many good deals that are available to subsidized enrollees today,” Fann--a fellow of the Society of Actuaries--said.
Many people who make more than 100 percent to 400 percent of the poverty level, the income level for receiving premium tax credit subsidies, may have moved out of silver-tier plans that are bearing the brunt of the 2018 rate increases, Fann said. They could decide to move back to silver plans in 2019, he said.
On the other hand, funding the CSRs “could reduce enrollment for subsidized enrollees,” Fann said. “There’s a lot of people able to get insurance for free this year” because of the higher subsidies. “They won’t next year if the CSRs are funded.”
Repealing penalties for not having qualified coverage could raise rates by about 10 percent on average, Fann said.
—With assistance from Alex Ruoff
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For More Information
The Congressional Budget Office Cost Estimate of the Bipartisan Health Care Stabilization Act of 2017, dated Oct. 25, is at https://www.cbo.gov/system/files/115th-congress-2017-2018/costestimate/bipartisanhealthcarestabilizationactof2017_0.pdf.