In most states, insurers will be filing Affordable Care Act (ACA) marketplace plan proposed rates in June. However, a few states required insurers to submit their rates in May, including Connecticut, the District of Columbia (DC), Maryland, Vermont, Virginia. As of this writing, Connecticut, DC, Maryland and Vermont have made insurers’ filings available to the public, including the actuarial memoranda, which provide a narrative description of the factors driving proposed rate increases. These early filings, made available in just a few states, provide a glimpse into how insurers are responding to the considerable uncertainty over federal policy when it comes to the ACA.

What do the early rate filings tell us?

In general, insurers participating in the ACA-compliant individual market are proposing significant premium rate increases for 2018, ranging from 6 to 50 percent or more. The health plan actuaries submitting these filings point to a number of factors driving these increases, including:

• Weak enforcement of the individual mandate. While insurers appear to assume that the ACA’s requirement to maintain health coverage or pay a fine will remain the law of the land, they do not expect the Trump administration to aggressively enforce it. For example, CareFirst BlueCross BlueShield in Maryland states: “…we have assumed that the coverage mandate introduced by ACA will not be enforced in 2018 and that this will have the same impact as repeal. Based on industry and government estimates as well as actuarial judgement, we have projected that this will cause morbidity to increase by an additional 20%.” (emphasis added)
• Less advertising and outreach to consumers. Early this year the Trump administration came under fire for canceling an advertising campaign for the ACA’s marketplaces, resulting in depressed enrollment. Insurers took note, and some appear to expect lower public awareness of enrollment opportunities. For example, a Cigna filing notes that they expect a smaller and sicker population to enroll in 2018, due in part to the “overall awareness of individual health insurance products.” Similarly, Anthem’s Connecticut filing notes their expectation that the individual market “will continue to shrink.”

Another factor in insurers’ price hikes is the return of the insurance industry fee, the ACA’s tax on insurers selling health, dental and vision plans. Congress suspended the fee for 2017; it is scheduled to return in 2018. However, the fee doesn’t appear to be a large driver of the rate increases. For example, a CareFirst filing in DC estimates state and federal taxes and other administrative costs to be about 0.9 percent of its requested 39.6 percent rate hike; Vermont’s MVP Health Care added 1 percent to premiums due to this fee.

In almost all cases, the insurers filing in these states make clear that the proposed rates are built on the assumption that they will be fully compensated for the ACA’s cost-sharing reduction (CSR) plans in 2018. They reserve the right to submit new rate proposals in the event the Trump Administration shuts off those payments. On this issue, it is worth quoting from Anthem’s Connecticut filing at some length:

“Unfortunately, the continuation of the funding for CSR subsidies for the 2018 calendar year is not yet certain. This uncertainty adds more unpredictability to the rate process and introduces an uneasy level of market volatility, compromising the ability to set adequate rates responsibly. It has been estimated that lack of CSR funding could increase premium rates for Silver plans some 20 percent over and above adjustments needed due to increases in medical costs, utilization and overall morbidity of the membership.

“Without certainty around the critical issue of CSR funding in the coming weeks, Anthem likely will have no choice but to re-evaluate this filing which could include requests for additional rate increases, elimination of certain product offerings, or the exiting of certain individual ACA compliant markets altogether.”

To date, the Trump administration has not made any decision relating to the CSRs, forcing insurers – and the state regulators who must review their rate filings – to grapple with considerable uncertainty.

The bottom line? Insurers that have filed proposed rate increases to date are doing so because they expect a smaller, sicker pool of enrollees in the individual market. They are expecting this largely because they believe the Trump administration will weaken enforcement of the individual mandate (or, just as bad, that consumers will perceive it to be weakened). They also appear skeptical that there will be sufficient consumer awareness of marketplace coverage options among the healthy uninsured. This, along with the uncertainty over future CSR payments, will likely play out with reduced insurer competition in the marketplaces and higher premiums for many consumers.