New York: What the HELL is Gov. Cuomo thinking?? (Updated: Rhetorical question)

Michael Capaldo is an employee benefits consultant and self-described "ACA wonk" out of New York.

I don't know him beyond some in-depth wonky online discussions, but I don't see any reason for him to make the following up:

Gov. Cuomo just announced that he has directed Supt. Vullo to reject any individual market rate increase that included an increase to compensate for the repeal of the individual mandate

— Michael Capaldo (@consultbenefits) July 30, 2018

Assuming that nothing else changes during the rate review process, this makes carriers that didn't associate a % of their rate request with the loss of the mandate big winners...and those who did, not so much.

— Michael Capaldo (@consultbenefits) July 30, 2018

Here's what he's talking about: The New York Dept. of Financial Services rolled out preliminary 2019 ACA individual market rate changes in early June. While they vary by carrier, of course, overall the carriers projected that without the ACA's individual mandate penalty they'll have to jack up prices by around 24% vs. just half that if the mandate hadn't been repealed by Congressional Republicans last December. Both of these numbers are somewhat higher than most other states, but neither is too unreasonable under the circumstances:

Out of 14 carriers total, 12 of them tacked on an average of 11.9 extra percentage points to account for what they figure will be the adverse selection impact from healthy ACA-compliant market enrollees dropping their coverage in the absence of the individual mandate penalty.

Now, the truth is that no one knows for certain just how big of an impact there will be. Two carriers in NY aren't adding anything extra (CDPHP and Nealthnow NY). Others are assuming a huge impact (Fidelis and IHBC). Most are somewhere in between.

However, if Mr. Capaldo's tweet is accurate, that means that none of the "mandate repeal" rate hikes will be allowed for 2019.

If this is the case, there's likely something else going on behind the scenes...secret negotiations with the state legislature to reinstate the mandate, perhaps? An executive order? Some sort of state-based subsidy to make up for the carrier's losses?

The other possibility could be that Cuomo has decided that the actuaries for most of the carriers are making a mountain out of a molehill and is willing to bet the carriers' businesses that he's right. That would be a pretty dangerous bet, so I have to figure there's something else at play as well.

UPDATE: OK, here's what he's apparently talking about...I'm watching the replay of the 34 minute event now...will post updates once I know what's up:

1 million people in New York have gained health insurance under the Affordable Care Act. President Trump is trying to wreak havoc on our health care system, but we're not going to let that happen in the State of New York.

— Andrew Cuomo (@NYGovCuomo) July 30, 2018

UPDATE x2: OK, it took several introductions and Cuomo talking for a good 18 minutes before he got to the point, but here's the deal:

"Removal of the individual mandate is making insurance companies nervous, so they're adding big rate's diabolical..."

"They've come to the state and asked for a 24% increase...they would be effective in collapsing the exchange if that happens."

"We're not gonna let that happen. If we allow that rate increase to go through, it'd be hundreds of millions of dollars as a bonanza for the private insurance companies."

"Today I am directing the DFS superintendent to reject any rate increases as an effect of the individual mandate being removed."

"Insurance rates must be based on actual cost, not on political maniupulation."

Now he's on to other topics (kidnapping immigrant kids at the border, gun violence, sexual harassment, etc).

Good grief. I think...I think that's the whole story on healthcare.

OK, speech is over. Yeah...he's basically claiming that the primary reason the risk pool will collapse is because of the rate increases, not because of unsubsidized healthy people dropping their coverage due to the mandate being repealed.

The truth is, adverse selection is caused by both factors: Some healthy people drop out because of there being no mandate, which causes rates to increase, which causes more healthier people to drop out and so on.

IF this announcement was paired with a restoration of the individual mandate by the state legislature, this would be fantastic news. However, unless there's some additional development that wasn't mentioned in his speech, I wouldn't be at all surprised to see half of those 14 carriers drop out of the ACA market in New York.

UPDATE x3: It's important to keep in mind that last summer, Cuomo issued an executive order tying MCO (Medicaid Managed Care Organization) contracts to ACA exchange participation. I applauded this at the time and encourage it for other states, but that assumes the carriers are also allowed to price ACA policies appropriately.

In this situation, any carrier which has won an MCO contract is required to stick around the NY exchange but isn't allowed to bake mandate repeal into their 2019 premium rates, which means they're stuck between a rock and a hard place: They can't leave but they may also be guaranteed losses if they stay.

I have no idea which of the 14 carriers listed has/is vying for an MCO contract at the moment.

UPDATE x4: OK, here's the thing: It's possible that concerns over how much adverse selection will be caused by the mandate being repealed are overblown. Carriers in states like Rhode Island think it'll be nominal at most, and even two of the NY carriers didn't assume any negative impact.

HOWEVER, there's a huge difference between the state regulators carefully reviewing the rate filings, crunching the numbers, thinking it through and concluding that the impact will be lower than the insurance carrier projects...and the Governor of the state just standing up in front of a TV camera and annoucing, flat out, that there will be NO mandate repeal impact recognized at all.

Again, there may be something else afoot, but otherwise this feels very much like a purely poltical ploy on Cuomo's part. The cynic in me says that he's probably feeling the heat from Cynthia Nixon in the NY gubernatorial primary, knows he has to do something splashy on the healthcare front, and knows that everyone hates health insurance companies and assumes every price increase is done out of pure greed, so there's lots of PR upside and zero downside.

Even if a few of the carriers do drop out, he can still just pin the blame on them without suffering much political backlash from the voters, I'd imagine: "I wouldn't let them price gouge you, so they took their ball and went home!" etc etc.

UPDATE x5: Oh, wow...

Conveniently this announcement was made after June 30, which was the deadline for a carrier to announce a complete withdrawal from a market. They could still drop off the exchange though.

— Wesley Sanders (@wcsanders) July 30, 2018

Whoops. I didn't know that (but I'm guessing Cuomo did).

In this particular case, dropping off the exchange but remaining in the off-exchange market would probably effectively cushion the carriers from 80% of the impact, since so few people are buying off-exchange these days anyway...but they'd still be stuck to some extent.