Health Plans Blame Market Instability for 2019 Premium Hikes

Insurers are starting to file their rate requests for next year and all signs point to a third year of double-digit increases.

Stop me if you've heard this one before. Health insurance premiums are going to rise again next year, even after a startling increase this year.

Health plan executives say they really have no choice. With their costs rising and political moves driving consumers away from their products, they have to charge more just to survive.

Sometimes a lot more. Some Maryland residents will be asked to pay almost double their current rates.

They probably won't pay it though, because Marylanders now have other options such as short term health plans.

And that's part of the problem, the insurers say.

Health Insurance Price Drivers

Higher healthcare premiums in 2019 will be  driven by several factors that payers say are beyond their control, including

• Increases in medical trend and pharmacy costs
• The elimination of the individual mandate penalty
• The impact of new regulations that expand the availability of association plans and short-term plans

The only saving grace, they say, is the one-year moratorium on the health insurance tax, which could counter some of the factors driving the increases, but only a little, not nearly enough to make a dent in the overall increases.

CBO Eyes 15% Average Premium  Increase

The  health insurers' explanation for why they're raising premiums so much in 2019 is outlined in a recent report from America's Health Insurance Plans, the trade association representing the country's largest health plans.  

Next year will be another challenging one for the health insurance market, says, Greg Gierer, AHIP's senior vice president for regulatory affairs.

"Medical spending is on the upswing, about 6.5%, and there are policy actions that create uncertainty and instability in the market," he says.

"Uncertainty in a market drives instability and pushes upward pressure on premiums. With the individual mandate penalty going away in 2019, independent experts say that is going to drive up premiums between 9% and 10% because the individual coverage requirement is one of the key factors for getting younger, healthier people to purchase coverage."

The Congressional Budget Office estimates premiums for benchmark plans on the health insurance exchanges will increase by about 15% on average in 2019. That's a steep rise, and the cumulative effect is even worse for consumers after premiums increased by an average 34% in 2018.

Some states are begin to release information on proposed rates health insurance rates for 2019:

• Oregon is reporting rates that range from a decrease of 9.6% compared with 2018 rates to an increase of 16.3%.  
• Vermont is served by two plans. Both requested increases. Blue Cross and Blue Shield of Vermont wants an average 5.3% increase for plans offered to individuals, families and small businesses and MVP Health Care is asking for an average 6.4% percent increase.
• Maryland has seen requests for premium increases ranging from 18.5% to an incredible 91.4%.
• Virginia rates for 2019  range from a decrease of 1.9% to an increase of 64.3%.

Higher Spending and Rules Changes

AHIP breaks down the factors leading to those increases this way:

• Medical price inflation and prescription drug cost increases are responsible for a premium increase of  5.7% to 6.5%.
• Elimination of the individual mandate penalty will result in an increase of 9% to 10%.
• The expansion of association health plans  is prompting an increase of 2.7%  to 4.0%.
• Recent moves by the Trump administration to make short-term healthcare plans more attractive to consumers  are responsible for an increase of 0.7% to 1.7%.
• The moratorium on health insurer tax for 2019 will reduce rates 3%.

Some of these changes leave payers at a serious disadvantage in a competitive market, they say, particularly the increased availability of non-ACA compliant health plans.

"The association health plans would be allowed to operate exempt from many of the requirements that apply to qualified health plans on the exchange, including the requirement for coverage of essential health benefits and the community rating requirements that make sure people don't face higher rates because of their health status," AHIP's Gierer says.

"Allowing these noncompliant plans to operate outside the ACA requirements bifurcates the risk pool and siphons younger, healthier people out of the ACA market and into these alternative coverage options. That has a detrimental effect on the risk pool and raises premiums for everyone else."

The increases predicted for 2019 would be the third year of double-digit increases in healthcare premiums, and Gierer says that shows how much the insurance industry is struggling to find its way in this new healthcare landscape. Consumers are being asked to pay more because the insurance companies are fighting to survive, he says.

"This is a symptom of a market that is not stable," Gierer says.

How States Could Help

He notes, however, that this instability is seen primarily in the individual marketplace, which covers about 18 million Americans. Another 150 million are covered through their employer-purchased plans.

"We're not seeing this kind of premium increase in the employer market, so this is an issue of very specific factors in the individual market fueling these types of premium increases," he says.

The 2019 increases in the individual market also are not set in stone yet, Gierer says. Some state policy decisions, such as creating re-insurance programs to back up health plans and cut some of their risk, could still influence the final numbers, he says.

Alaska, Maryland, and Minnesota have created or plan to start re-insurance programs, and about half a dozen more are seriously considering it, Gierer says. Any forward movement from those states could hold back 2019 premium increases if it were to happens soon, he says.

"I wouldn't say there is nothing to be done at this point, but time is running short," Gierer says.

"Plans are finalizing their decisions about participation in the market and premiums, but there are a number of policies at the state level that could help strengthen risk pools and allow states to protect their markets."