Washington State: 24% avg. rate hikes, mostly due to Mandate uncertainty; Silver Switcharoo being held in reserve

I've spent the past two weeks posting about almost nothing besides the Graham-Cassidy debacle, so haven't had a chance to keep on top of the approved 2018 rate changes as I usually do. Fortunately, Louise Norris of healthinsurance.org has stayed on the rate hike job, and reports the final numbers out of Washington State:

2018 rates: 24% approved rate increase, due in large part to federal uncertainty — and higher backup rates will be implemented if CSR funding is cut mid-year

Insurers in Washington had to file rates and plans for 2018 by June 7, 2017. On June 8, Kreidler’s office published a summary of what had been filed (rate filings are available here, and that page will show final rate changes for the individual market once they’re approved), and publicized the filing details on June 19. The average proposed rate increase in Washington, before any subsidies are applied, was 22.3 percent.

The Washington Office of the Insurance Commissioner confirmed on September 26 that they have not yet approved rates for the overall individual market, including off-exchange plans — they noted that the approval process would be complete (with final rate changes available here) sometime in October. But on September 25, Washington Healthplanfinder announced that the exchange had finished certifying plans for 2018, with an average rate increase of 24 percent for plans sold in the exchange. The approved rates are based on the assumption that CSR funding will continue, but the exchange noted that the premium increases are due to “cost trend and federal uncertainty, particularly enforcement of individual mandate.”

Yup, while CSR sabotage gets most of the attention, the threat (both overt and implied) by the Trump Administration to not enforce the individual mandate has also been contributing to the heavy uncertainty factor for 2018. Unfortunately, unlike the CSR impact, which many carriers have broken out quite explicitly, the mandate enforcement impact isn't mentioned nearly as often and is fuzzier about the numbers when it is. In this case, the fact that they specifically cited mandate enforcement as the primary cause of the rate increases suggests that it's at least half the total (perhaps 12 points of the 24% average increase).

The exchange also explained that the state is taking a unique approach to the CSR funding issue: Regulators have approved rates that assume CSR funding will continue, and those are the rates they intend to implement when open enrollment begins on November 1. But they have also approved a back-up set of rates for on-exchange silver plans, which are high enough to make up for the loss of federal CSR funding. If CSR funding were to be cut off at some point during 2018, Washington regulators would use their authority to implement the higher on-exchange silver plan rates at that point.

The Washington Office of the Insurance Commissioner confirmed that if an on-exchange plan is also sold off-exchange, the CSR load would apply both on and off the exchange. They are not adjusting all off-exchange plans to make them slightly different from the on-exchange plans in order to confine the CSR load only to exchange plans (that approach is being taken by California). Plans that are only sold off-exchange would not have the CSR load added.

The exchange board noted that if CSR funding were to be eliminated mid-2018 and the new on-exchange silver plan rates had to be implemented, they would communicate the details to enrollees, but would also consider a special enrollment period at that point. People with on-exchange silver plans would be protected from the bulk of the higher premiums if they were receiving premium subsidies. But people who don’t get premium subsidies and who have on-exchange silver plans would have to shoulder the full brunt of the new premiums with the CSR load. If those rates had to be implemented during the year, a special enrollment period would give unsubsidized silver plan enrollees a chance to switch to a different plan (exchanges can implement special enrollment periods for exceptional circumstances at their discretion).

Good grief.

If you didn't follow all of that, it's totally understandable. Basically, Washington State is going to price policies as if CSRs will be paid...but has an emergency backup plan in case they aren't (or if they get cut off part way through the year). If that happens, they would implement the Silver Switcharoo Gambit in the middle of the year, which in my view is only making an already overcomplicated situation even more complicated, but there aren't any perfect solutions to this situation.

So, let's say there are two people paying $500/month for the same on-exchange Silver plan. One of them is receiving $200/month in APTC assistance ($300/month net), the other is paying full price ($500/mo).

As long as the CSR reimbursements flow, nothing changes. However, let's suppose that Donald Trump decides to follow through with his threat and pull the CSR plug in, say, May. If that happened, that $500/month premium would suddenly, and mid-year, shoot up to, say, $600/month. Notices would be sent out to the enrollees.

The guy paying $300/month wouldn't miss a beat--his APTC assistance would increase accordingly (from $200 to $300), so he'd still be paying $300/month; no problem.

However, the unsubsidized enrollee would see their rate increase $100/month...however, they would be given the option to switch to a different plan mid-year via a Special Enrollment Period, which is not normally allowed.

This would be...strange and confusing, to say the least. I presume it's totally legal (the mid-year pricing change strikes me as coming close to a bait 'n switch scenario, although I presume the powers that be in the Washington Insurance Commissioner's office and the Washington Health Benefit Exchange have run it through the appropriate lawyers), and it makes sense on one level, since it's also possible that CSR payments will be made all 12 months of 2018 after all, making all of this CSR hand-wringing moot), but it's still pretty messy.

In any event, that's a 24% average rate hike if CSR payments are made. I don't know how much higher the "emergency CSR rates" are for Silver plans, but the Kaiser Family Foundation estimates that this would tack an additional 15 points on, which would translate into perhaps 9 points when spread across all metal levels, for a total of around 33%.

In short:

  • NO sabotage factor: ~12% (?)
  • Mandate sabotage factor: 24% (actual increase)
  • Mandate + CSR factor: ~33% (only implemented if necessary mid-year)