Md. health insurance rate hike requests drawing painstaking review

Maryland Insurance Commissioner Al Redmer expects to make a long-anticipated decision by Friday on substantial rate increases on the individual market requested by Maryland’s health insurers.

The insurance commissioner has taken great pains to review the request as he seeks to strike a balance between keeping premium increases fair for consumers while noting that so far, insurers have lost hundreds of millions of dollars through the individual exchanges created by the Affordable Care Act.

The pressure to get the rates right led the Maryland Insurance Administration to hire an independent consultant, Oliver Wyman, for the first time in a rate case, with CareFirst‘s request to raise rates by more than 50 percent.

The insurer and the regulator have been in conversation about the rates all summer, and a decision once expected in mid-August will not be revealed until September.

State law stipulates that the insurance commissioner must set rates that are actuarially justified, adequate, not excessive and not unfairly discriminatory.

This year, CareFirst requested rate increases averaging 50 percent for its HMO plan and 59 percent for its PPO plan. Kaiser initially requested an increase of 18 percent in May, but refiled in June to request a 25 percent increase.

At the same time, the two insurers have seen mounting losses. Since the exchange started in 2017, CareFirst has lost nearly $355 million, about 15 percent of its revenue. Kaiser has lost $92 million, about 22 percent of its revenue.

Since requesting average premium increases of 50 percent, Burrell has consistently blamed these losses on higher premium requests.

The biggest problem for CareFirst has been increasing morbidity in the pool. Sicker people tend to be the ones buying health insurance, and the Affordable Care Act’s individual mandate has been too weak to encourage healthier younger people to buy insurance, Burrell has said.

In all, it has led to a situation where CareFirst pays out more in medical claims than it takes in from premiums.

Around 240,000 Marylanders buy health insurance on the individual exchange. CareFirst covers about 75 percent of the market. It covers 160,000 through its HMO plans and 24,000 through its PPO plans, which generally cover sicker populations. Kaiser covers around 62,000 people in the state.

While the individual market has been stricken with instability, Maryland’s once-volatile small group market has become a hidden success. The market, created in the early 2000s, once saw the same concerns with high rate increases.

But this year, insurers only requested single-digit increases. CareFirst, which also covers about 75 percent of this market, will see nearly $200 million of underwriting profits on the small group market.

Initially, four companies filed rate requests with the Maryland Insurance Administration in May. But in June, UnitedHealthcare dropped out of Maryland’s market. It had covered less than 1 percent of Maryland’s individual market.

Evergreen Health had also hoped to re-enter the individual market in 2018, after leaving the market as it sought to become a for-profit insurance company. However, Evergreen’s investors backed out of the deal last month, forcing Evergreen to shut down. Its assets are in state receivership, where Redmer hopes they can be bought by a new investor hoping to start selling plans in Maryland.

In most of Maryland’s rural counties, CareFirst is the only insurer. Kaiser does not offer plans outside of the Baltimore and Washington Metropolitan areas.

This summer’s rate review process also took place against the backdrop of increased anxiety about cost-sharing reduction subsidies provided by the federal government to insurance companies. President Donald Trump has complained on Twitter several times about the subsidies as “bailouts” for the insurance industry. He has not committed to paying the subsidies into the future.

Redmer instructed insurers not to consider the potential that these subsidies will not be paid, telling companies to follow the Affordable Care Act as written, where the subsidies are included.