Unsure of the Future, States Guess Their Way Through 2018 Rate Filing Season

Faced with uncertainty around the federal government’s commitment to pay out funds meant to help consumers afford coverage on Affordable Care Act exchanges, state insurance commissioners are being put in the position to guess the future. If they make the wrong choice, their residents could find themselves without coverage and the ability to access care.

States are now in the home stretch of finalizing rates for the upcoming 2018 open-enrollment period, but the Trump administration’s pattern of funding cost-sharing reduction payments on a month-by-month basis has put state regulators and insurers in unknown—and somewhat uncomfortable—territory.

“The administration controls the panic button,” said Mike Rhoads, deputy commissioner of health insurance for Oklahoma. “They can simply discontinue all of a sudden these payments to plans.”

Oklahoma insurance officials aren’t the only ones concerned. “There has never been this level of uncertainty in the individual health insurance market,” a spokesman for the National Association of Insurance Commissioners said.

Modern Healthcare contacted regulators in all 50 states and the District of Columbia to see how they are handling the uncertainty. In the absence of any assurances by the federal government, state insurance commissioners are making one of three choices:

  • Have plans draft two rates with one that assumes CSRs and one that does not
  • Issue no guidance at all or have plans file assuming CSRs will continue
  • Have them file rates assuming CSRs will not continue

“If a state chose one assumption … and if their assumption was incorrect, they are likely to find insurers dropping coverage,” said William Custer, associate professor and director of the Center for Health Services Research at Georgia State University.

How plans are filing rates
With uncertainly swirling about whether or not cost-sharing reductions for will continue for marketplace plans, plans are taking three approaches: develop two rates one that assumes CSRs will continue, one that does not. Or filing one rate that assumes their continuation or one that does not.

Based on responses to Modern Healthcare’s inquiry, 38 states and Washington, D.C., have either told plans to assume CSRs or gave no guidance at all, letting plans choose how to proceed.

Another seven states have had insurance companies draft two rates and six have companies that are filing assuming no CSRs.

“We’re trying to give carriers some sort of certainty,” said Idaho Department of Insurance Product Bureau Chief Wes Trexler, which asked carriers to not assume CSRs.

Plans assuming the payments will continue probably face the highest level of risk, as do consumers in those states.

“If a plan is overly optimistic about the CSRs and then money is taken away, they are facing significant financial losses,” said Ceci Connolly, CEO of the Alliance of Community Health Plans.

Currently, the federal government is spending $7 billion a year to lower deductibles and co-pays for about 8.4 million customers with silver plans, which are the only plans eligible for the funds.

The Kaiser Family Foundation estimates that cost-sharing reductions would cost the federal government about $10 billion in 2018.

“Plan solvency will be threatened, likely causing issuers to pull out from the marketplaces in short order,” said Meg Murray, CEO of the Association for Community Affiliated Plans, which represents safety net health plans.

Anthem, which sold plans on the marketplace in 14 states this year, questioned during its earnings call Wednesday if profitability was possible without CSRs. The insurer has already told regulators it plans to leave or scale back its presence on the marketplaces in Indiana, Ohio and Wisconsin. Depending on what happens with CSRs, more exits could follow, which is why it hopes for guidance from lawmakers or the Trump administration as soon as possible.

“I can’t underscore that time is of the essence, and some of our critical decisions may have to occur in a relatively short period of time,” CEO Joseph Swedish said on the investors call.

In the instance that a plan files assuming no CSRs and that ends up being the case, premiums could rise at least 20% from last year, according to Kaiser.

Such a scenario would result in more consumers either choosing to have no coverage at all or choosing a bronze plan, according to Sean Mullin, a senior director at the healthcare consulting firm Leavitt Partners.

Having more people moving into high-deductible bronze plans would be the worst-case scenario for medical providers.

“There will be more people getting procedures without providers getting paid leading to an increase in bad debt,” Mullin added.

This enrollment shift would likely hit community health centers the most as they are not allowed to turn away patients for inability to pay. Many have already reported that their uncompensated-care costs were rising as a result of bronze plan enrollees.

If insurance companies assumed no CSRs and they are paid, they would have to issue rebates to consumers as they would have taken in too much money under the medical-loss ratio guidelines outlined in the ACA. This policy dictates the amount of margin that can be retained after medical costs are paid.

For the states that have had plans develop two rates, actuaries are faced with the unprecedented challenge of making sure rates are neither too high or too low, according to Rebecca Owen, health research actuary for the Society of Actuaries. “Filing two sets of rates in one state is not at all typical,” Owen said. “It is not as simple as including or excluding an amount for CSR in the rates.”

Factors that come into play when developing two rates is predicting how consumers will respond to both prices and how other plans in the market will respond to the continuation or end of CSRs.

Not all plans receive the same amount of CSRs, so they may choose a limited premium increase in the event the funds vanish.

For the 38 states now relying on HealthCare.gov for their residents to buy insurance, there appears to be a limited opportunity for plans to update their rates once they are submitted to the CMS, which is only allowing them to submit one rate by the Aug. 16 deadline, according to a CMS spokeswoman. Plans on the federal exchange will have until Sept. 27 to sign a contract with the CMS. A truncated open-enrollment season runs from Nov. 1 to Dec. 15.

Some states say they’ve heard the CMS may allow amendments to rates should an announcement be made about CSRs ending, but specifics as to how that process would work haven’t been revealed.

It’s unclear how late the CMS could wait before it must upload rates into the federal exchange. Insurance companies also need to know which rates the agency would use as early as possible so that they can develop promotional materials for consumers.

“There is not a lot of runway from an operations standpoint to be sure rates are actually rolled out in time,” said Hans Leida, an actuary at consultancy Milliman.