Premium rates for carriers selling health insurance plans on Maryland’s individual market are slated to increase again next year, some by an average of more than 30 percent, according to state insurance regulators.
Officials say the increases reflect continuing changes in the market following the implementation of the Affordable Care Act and the losses carriers have incurred from covering new members.
In the state’s small-group market, which Maryland Insurance Commissioner Al Redmer Jr. said is relatively stable, carriers will see an average rate increase of no more than 9.8 percent in 2017, and some carriers will see their rates reduced. Evergreen Health Cooperative gets the largest average increase with 9.8 percent, while three UnitedHealthCare carriers are seeing a 4.5 percent average rate reduction.
About 4.1 percent of Marylanders are covered by small-group plans, provided by businesses with 50 or fewer employees.
In the individual market, where about 4.4 percent of Marylanders get their insurance, the average premium rate increases for the six carriers range from 20.3 percent for Evergreen Health Cooperative to 31.4 percent for two CareFirst companies, CareFirst of Maryland Inc. and Group Hospitalization and Medical Services Inc.
In a corporate statement, CareFirst officials wrote that the increases reflected the cost of caring for an older population with more chronic medical conditions that was new to the insurer in 2016.
“CareFirst has absorbed and continues to absorb substantial losses covering individual ACA members in Maryland. These rates reflect the necessity of stemming these losses and represent an attempt to ensure that premiums cover health care costs,” CareFirst officials wrote.
About 90 percent of Marylanders will be unaffected by the premium rate changes because they are insured through large or self-insured employers, “grandfathered” plans purchased prior to March 2010, or federal plans such as Medicare, according to the Maryland Insurance Administration.
Premium rates for Evergreen were higher than the company requested, which Redmer said should help cover a $24.2 million payment Evergreen has been ordered to make to CareFirst due to an ACA provision known as risk adjustment.
Under the rule, companies with healthier patient pools are required to pay companies with sicker clients – spreading risk more evenly throughout the market. Evergreen is challenging the program in an ongoing federal lawsuit.
The impending risk-adjustment payment was the primary reason Evergreen had to raise its individual rates, but it still had the smallest average increase – 20.3 percent – on the individual market, said Evergreen President and CEO Dr. Peter L. Beilenson. Evergreen’s small-group increase of 9.8 percent comes after two years of no premium increases, he said.
“We expect to be quite competitive this year,” Beilenson said.
Carriers are still feeling the effects of decisions made when the ACA was first implemented.
During the first open-enrollment period in 2014, insurers offered individual-market premium rates that were lower than the small-group market rates in order to get a share of the market, Redmer told reporters this week.
In that first year, CareFirst saw about 21,000 members from 7,000 employer-clients shift from the small-group market to the carrier’s individual-market plans, where premiums were lower, he said.
This resulted in a sort of “double-whammy” to CareFirst: The company was essentially insuring the same amount of sick people but raising less money from premiums to cover their claims, Redmer said.
As a result, CareFirst and other insurers lost a lot of money in 2014, leading to rate increases in the following years, he said.
The number of people insured through the individual market increased from 232,082 in 2015 to 263,140 in 2016, according to the Maryland Insurance Administration.
Penalties for not having insurance also haven’t been as effective as officials hoped in making sure people are insured, since the penalty can be much lower than a health plan’s deductible, Redmer said.
The first few years of the Affordable Care Act also included temporary state and federal reinsurance programs, which helped reduce premium rates by an average of 3.3 percent, but those programs are being eliminated after 2016, according to the Maryland Insurance Administration.
In the coming year, the increased individual premium rates may cause the earlier migration of small groups to the individual market to start reversing itself, Redmer said, explaining that he expected insurance brokers to now recommend the small-group market as a slightly better deal.