How High will Initial 2018 Rate Hike Filings Be? Well...

For 2017, the weighted, average, unsubsidized (that's critical!) premium rate increase for ACA-compliant individual market healthcare policies was roughly 25% nationally.

There were plenty of reasons for this, including normal inflation/healthcare costs; the discontinuation of two of the three stabilization programs (Reinsurance and Risk Corridors, although the RC program had already been sabotaged a year earlier anyway); correction for under pricing by many carriers in the first couple of years of the ACA exchanges; and, of course, the fact that the ACA exchange risk pool continues to be worse than hoped for in numerous states/counties.

Of course, for the roughly 10 million exchange enrollees who are receiving tax credits, this didn't really impact them much at all:

On average, ACA marketplace consumers receiving tax credits are literally paying exactly the same this year as last year -- $106 per month.

— Larry Levitt (@larry_levitt) March 15, 2017

...although this does mean that the federal government will be ponying up around another $10 billion this year to cover the difference:

On the flip side, the federal government's average cost for ACA premium tax credits increased from $290 per month to $383.

— Larry Levitt (@larry_levitt) March 15, 2017

So, what about next year?

Well, I've written multiple times about the massive uncertainty facing not just patients, hospitals/clinics, doctors/nurses and so forth but also the insurance carriers themselves given that a) the ACA exchanges are in need of some significant improvements and b) Trump/the GOP are dead-set on ripping the entire law (or parts of it?) apart.

Some of the carriers, like Humana have already decided that the individual market is too toxic for the foreseeable future REGARDLESS of what the GOP does and have already taken their ball and gone home.

Others, like Molina, haven't made up their minds yet, but are already warning of massive (unsubsidized) rate hikes along the order of 30% or more if the GOP's Trumpcare bill actually goes through...assuming they stick around for 2018 at all. And remember, that would be 30% on top of whatever rate changes they'd be requesting if Trumpcare doesn't become law.

Confusing things further is the timing of all of this. Remember, the deadline for the initial 2018 filings is rapidly approaching. It was originally in the late-April/early-May range, but the HHS Dept. is already bumping it out until June, I believe, which is understandable under the circumstances, I suppose.

However, it's important to remember that those are only initial rate filings. They can, and often do, change quite a bit between the initial filings and the final prices as of November 1st. Sometimes it's just a starting point for negotiating with the state insurance departments, which regulate these things and who have to sign off on the rates in most (but, sadly, not all) states. Sometimes the carriers really do think these rates are reasonable, but the regulators simply disagree. Sometimes the initial filings are changed based on things which change over the course of the summer or fall--you saw that a lot the last couple of years, as some insurance companies decided to bail on various counties/states entirely, which led to a domino effect as the remaining companies recrunched their numbers to account for the changing marketplace. Finally, there's the ongoing Cost Sharing Revenue (CSR) lawsuit hanging over the heads of everyone like the sword of Damocles.

Whatever the reasons, there's a lot of shuffling around which happens before the dust some cases the final, approved rates end up being lower than the initial request. In some cases they're approved as is, and in a few cases, the state regulators actually insist on the rates being increased more than the carrier requested...because the regulator's job isn't simply to keep premiums low no matter what, but also, to a certain degree, to try and keep carriers solvent in spite of themselves. This isn't because they necessarily care about the well-being of a particular company, but because if that company doesn't have a minimum threshold of funds to cover enrollee claims the following year, they often have to kick them off the market entirely (effectively the equivalent of an office building being condemned by an inspector).

Here's the thing: Even if Hillary Clinton had become President and repeal of the ACA wasn't a factor, most of the drama above would still be going on throughout this summer/fall (except for the Reinsurance/Risk Corridors). The fact that Donald Trump is now in the White House and the GOP is pushing ahead with their insanely awful "replacement" plan just ramps the chaos and uncertainty up by a factor of ten.

Again, however, the timing is crucially important to all of this stuff. Over at Balloon Juice, David Anderson takes a look at the various factors and concludes that all signs point to high INITIAL rate filings even if the final premium increases end up considerably lower in the end:

Filing actuaries hate being wrong. They hate being wrong the most when it costs their employers money and them their jobs. They have every reason to file high. The reviewing actuaries don’t want to be wrong but they have a public trust component to their job where they need to make sure that the filing entity will be an ongoing viable business while not taking too much advantage of the public.

Republicans want high rates to be filed. It gives them a good headline when they’ll need one to keep their base in line. Insurance company executives won’t mind giving them a good headline as it is a low cost favor and the number that is filed in June will not be the number approved for November.

State insurance commissioners won’t mind high filings. They will be able to issue press releases and have interviews where they can clearly, cleanly and honestly state that due to their work, the initial rates came down by 50% before Open Enrollment.

I'm looking at this from more of a flowchart angle: What are the possible outcomes of the current ACA/Trumpcare mess?

  • Possibility 1: Trumpcare passes both the House and Senate and is signed into law by Trump.
    • 1a: The GOP is somehow able to push through the rest of the Trumpcare agenda (killing off pre-existing conditions, essential health benefits, etc) by either nuking the filibuster or firing the Senate Parliamentarian
    • 1b: The GOP gets the partial repeal through but the rest of the ACA stays relatively intact.
  • Possibility 2: Trumpcare passes the House but fails in the Senate.
    • 2a: Trump/Price/GOP actually implements the ACA pretty much as is without trying to sabotage it further (stifling a laugh)
    • 2b: Trump/Price/GOP does everything possible to sabotage/bog down enrollments so they can blame the Democrats and the law itself (which they've already admitted they plan on doing)
  • Possibility 3: Trumpcare fails in the House, but the GOP regroups and tries to push a different version through later this spring. (I can't imagine they'd try any later than May, given the already-incredibly tight time window available for 2018)
    • 3a: They're able to cram through a revised version of Trumpcare through both houses
    • 3b: They cram the revised version through the House but not the Senate
    • 3c: The revised version fails both houses as well

...and so on. Again, each of the above scenarios leads to several more possibilities, like a Choose Your Own Adventure book. Some of them lead to partial repeal. Some lead to full repeal. Some lead to no changes at all, other than those that Tom Price puts into place as HHS Secretary. And, of course, there's the Trump Wildcard factor--will he say/tweet some insane new ACA-related executive order out of the blue? Who the hell knows?

Ironically, all of this uncertainty is likely to play out just as some of the carriers are starting to get the hang of the ACA exchange marketplace after all:

The Trump administration is rushing to repeal and replace Obamcare, with an urgency they say is needed due to the imminent collapse of the individual health insurance market under the current health-care law.

But financial results from one of the nation's largest Obamacare health plan providers suggest the tide is beginning to turn for insurers just as the rules are poised to change.

Health Care Services Corp.'s improved results for 2016 may be a sign that health insurers are starting to get a better handle on pricing plans for exchange enrollees. This comes as Congress debates a plan the Congressional Budget Office estimates could result in millions becoming uninsured.

..."Some of our plans say they've had success in starting to manage the health care of this population. They really were feeling they were getting onto a much better path with their individual business," said Ceci Connolly, president and CEO of the Alliance of Community Health Plans, a trade group that represents some the nation's largest not-for-profit insurers.

"That's a little bit of the irony of this: Three years into (Obamacare) they were getting the hang of the pricing" and now Congress is poised to change rules, she said.

The same story seems to be playing out with BCBS of Florida:

Florida Blue sells plans in all Florida counties and is the largest insurer participating in the federal marketplace in Florida.

With all insurers combined, about 1.7 million Floridians enrolled through the federal health care law for 2017. So Florida Blue is the largest insurer on the marketplace.

Sebelius and Geraghty both attended an annual health care conference at the University of Miami on March 3. At the conference, Kluding said, Geraghty told Sebelius “that the company is now serving approximately 1 million individual members, and that Florida Blue has operated this ACA business profitably.”

Florida Blue made a small profit in the ACA market — a single-digit positive margin, Kluding said.

Now, put yourself in the position of an insurance carrier executive and/or one of their actuaries. The level of uncertainty in the air is mind boggling. You have five choices for your initial filing:

  1. You can assume that the ACA will end up chugging along for another year relatively unsullied and file accordingly (which may still be high in some areas)
  2. You can raise your rate filings somewhat (call it "ACA + 20%") just in case everything goes to hell, crossing your fingers that the whole mess will work itself out.
  3. You can assume the worst and raise your rate filings substantially (call it "ACA + 40%") to make sure your ass is covered no matter what.
  4. You can decide that the exchanges are too messy and bail on them in some or all counties/states, while raising your rates substantially on the off-exchange market.
  5. You can pull a full Eric Cartman, declare "You know what? Screw you guys, I'm going home!" as Humana already has, and bail on the entire individual market, both on and off the exchanges.

Anderson believes, and I tend to agree with him, that for the most part, the initial (again, not necessarily final) rate filings will tend towards #3 above, with smaller doses of #2, 4 and 5. I can't imagine that any carriers will be bold enough to assume #1 at this juncture (though this could obviously change between now and mid-June)...even if, ironically, #1 ends up being how things actually play out (ie, no repeal, no replace, the ACA stays mostly as is...although with Trump/Price still poking it with sticks along the way).