We Read Actuarial Memoranda so You Don’t Have to: Trends from Early Health Plan Rate Filings

Insurers’ 2018 proposed rates are starting to trickle in to state departments of insurance, and some are being posted online. We recently blogged about an early round of rate filings, from Connecticut, Maryland, the District of Columbia and Vermont. Filings are also now public in North Carolina, Oregon and Virginia, and some trends are starting to emerge across multiple states and insurers. We took a dive into the actuarial memoranda that support each premium rate proposal, and learned the following:

Cost-sharing reductions are a big deal

Insurers are estimating that the loss of cost-sharing reduction (CSR) payments will drive between 14 and 20 percent of premium increases going into 2018. Blue Cross Blue Shield of North Carolina’s filing calls it “the primary driver” of their requested 22.9 percent rate hike. While Anthem’s HealthKeepers plan in Virginia submitted a rate request that assumes CSRs will continue to be paid in 2018, that company’s filing cautions:

“A lack of CSR funding introduces a level of volatility which compromises the ability to set rates responsibly. It has been estimated that lack of CSR funding could increase premium rates for Silver plans an additional 20 percent…”

Anthem goes on to say that if CSRs are not guaranteed for next year, they will consider exiting the marketplaces, reducing service areas, or requesting additional rate increases.

Generally, most insurers in these early filing states are submitting rate requests that assume continued funding of the CSRs. However, these insurers are also assuming that state regulators will allow them to submit rate adjustments and reevaluate their market participation if the CSR payments are discontinued.

The individual mandate matters

Most insurers in these early filing states are projecting a smaller, sicker risk pool in 2018, largely attributable to the lack of enforcement of the individual mandate. For example, Cigna’s North Carolina filing observes:

“The average morbidity in the individual market is driven by external factors such as the strength of the individual mandate, overall awareness of Individual health insurance products, and the presence or absence of transitional policies.”

Similarly, BridgeSpan in Oregon predicts that the individual market will “contract” thanks to the “weakening of the federal mandate to have health insurance.” Although similar sentiments were not explicitly stated in every filing, most insurers in these three states appear to share this view.

We did find a few filings from more optimistic insurers, such as Oregon’s PacificSource, which is requesting a 6.9 percent average increase, attributable primarily to medical inflation and the return of the health industry fee. Optima in Virginia is similarly not anticipating “any movement in general market morbidity” based on their observations of the market between 2016 and today. They have requested a 9.8 percent increase, similarly driven by trends in medical pricing and a 0.7 percent increase due to the health insurer fee.

Certainly, no one is likely to claim that the Affordable Care Act marketplaces were perfectly stable prior to the Trump administration taking office. However, these early 2018 rate filings are making abundantly clear that key policy choices by this administration related to the CSRs and individual mandate are primary drivers of the current instability and requested premium increases.

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