One Maryland insurer dropped out of the Maryland individual health insurance market, another projected double-digit enrollment declines and two more refiled to ask for rate increases higher than previously requested as state regulators Wednesday found themselves dealing with dramatic changes on the health exchange.
Cigna, which covers 630 consumers in Maryland through the individual market, dropped out of the exchange in a letter to Gov. Larry Hogan and Insurance Commissioner Al Redmer two weeks ago. Cigna will continue to cover its consumers through the rest of the year.
“Based on competitive developments and marketplace volatility, we determined that we cannot support a sustainable individual plan business in the state in 2018,” Julia Huggins, president of Cigna Mid-Atlantic Region, wrote in the letter.
Huggins wrote that the company would continue to monitor the market and would be interested in a return.
At a Maryland Insurance Administration hearing Wednesday, CareFirst CEO Chet Burrell, whose company is the dominant carrier in Maryland, defended the insurer’s requested rate increases of more than 50 percent on the individual market. This year, CareFirst covers about two-thirds of consumers on the individual market.
The insurer has requested a rate increase of 50 percent for its HMO plan and 59 percent for its PPO plan.
A significant portion of CareFirst’s request comes from an expectation that enrollment in the insurer’s individual plans will drop by at least 20 percent in 2018. Burrell blamed those decreases on both lax enforcement of the Affordable Care Act’s individual mandate and the rate increases.
“I think the adverse trends (of decreasing healthiness of pools) … will accelerate,” Burrell said. “We expect there could be sharp enrollment declines as a result of the (rate) increases.”
In constructing its rate increase request for 2018, the company had to strike a balance between compensating for consumers leaving because of less enforcement of the individual mandate and those leaving because of higher rates.
The higher rates have also come as a result of the insurer continually underestimating what it has needed to not lose money from the exchange. In the first year of rate requests, Burrell’s actuaries told him to request a 75 percent rate increase, but the company ultimately only asked for a 55 percent increase before voluntarily cutting those increases to 25 percent after discussions with the insurance administration.
“The thinking (was) that if we kept the price as low as we could, we had a better shot at attracting younger, healthier subscribers,” Burrell said. “The actuaries were more right than Chet Burrell was.”
Since the start of the Affordable Care Act exchange, CareFirst has lost around $690 million on the individual market, which accounts for 5 percent of its business.
However, he also said the company is “deeply concerned” by the amount of the increases they have asked for and that it is worried that there could be lasting damage to both consumers and the insurer.
“My conclusion is that we, CareFirst, and the state of Maryland are in a set of circumstances that are extremely difficult and challenging,” Burrell said of the need to balance consumer needs with the needs of the insurance company.
“We want to stay in this market,” he said. But, “We want rates that cover the costs.”
Evergreen and Kaiser were also expected to defend their rate requests at the hearing Wednesday morning. Instead, they refiled to request rate increases higher than they had in their initial filing last month.
Evergreen, which had requested a 28 percent rate increase, has now requested a rate increase of 65 percent. Because it was undergoing the process of converting to a for-profit insurer, Evergreen did not participate in the individual market in 2017.
Kaiser requested a rate increase of 25 percent, up from the 18 percent it had requested in May. This year Kaiser insures about one-third of the individual market.
Consumers and consumer advocacy groups protested CareFirst’s high rate request at the hearing while also acknowledging that the company is in a difficult position.
“The impact of these rates will overturn the gains we’ve made so far,” said Leni Preston, president of Consumer Health First.
The high rate increases could deal a blow to consumer confidence in the insurance markets, said Beth Sammis, also of Consumer Health First and a former insurance commissioner in the Martin O’Malley administration.
“It takes consumer confidence to keep people in the market,” she said.
Sammis also rejected the idea that there would be a significant change in enforcement of the individual mandate.
“We believe what has changed is the chatter, rather than the facts,” she said, pointing out that Congressional Republicans have not yet passed their American Health Care Act that would change the Affordable Care Act. Even if they passed the law this year, it would not be expected to take effect until 2019 at the earliest.
At the same time, while Consumer Health First wants to see lower rates, “We don’t want to put CareFirst out of business either,” Preston said.