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Significantly higher insurance premiums approved for 2018 on Md. health exchange

Maryland Insurance Commissioner Al Redmer. (File)

Maryland Insurance Commissioner Al Redmer. (File)

Marylanders insured through the individual health exchange will see substantially higher premiums in 2018, though not as high as insurers wanted, after Maryland Insurance Commissioner Al Redmer approved final rates Friday.

Redmer approved average rate increases of 34.5 and 50 percent for CareFirst’s HMO and PPO plans, respectively. CareFirst had asked for increases of 50 and 59 percent.

He also approved a rate increase of 22.5 percent for Kaiser Permanente’s plan in Maryland. Kaiser had asked for an increase of 23.5 percent.

“The travesty with all of this are the folks … that are going to see these rate increases that are significant, if not devastating, and are going to have to make some difficult decisions,” Redmer said.

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

Overall, the individual market in Maryland covers about 243,000 people. 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 carry the sicker populations. Kaiser covers around 60,000 people in the state.

A 40-year-old with CareFirst’s Silver plan on its HMO would pay $465.15 a month for coverage. A person of the same age would pay $685.99 for a Silver policy on CareFirst’s PPO plan.

A 40-year-old with coverage on Kaiser’s Silver policy would pay $373.48 a month.

Those rates more than double for a 60-year-old.

The higher premiums will have a limited effect on those low-income consumers in Maryland who get subsidies to pay for their premiums; those subsidies will go up, too. But the rate increases will be a particular hit for policyholders who don’t qualify for subsidies. Maryland, a wealthy state, has a higher percentage of such consumers on the individual exchange than most other states.

High losses by insurers

Carefirst CEO Chet Burrell (File)

Carefirst CEO Chet Burrell (File)

CareFirst CEO Chet Burrell has consistently cited high losses as a reason for the high rate increases. Since 2014 and the start of the individual market under the Affordable Care Act, the company has lost nearly $355 million, Redmer said, around 15 percent of the company’s revenue.

Many of the insurers pay out more in medical claims than they take in in premiums. That trend could continue as those people in the individual pools get sicker while healthier people drop out of the market.

Right now, Burrell said, around 75 percent of CareFirst’s pool is healthy while the other 25 percent contains the sickest people, driving most of the costs. If that number continues to drop, as Burrell believes it will, costs will continue to rise. The ratio dropping to 65 percent healthy could cause costs to rise by 50 percent, he said.

While the insurance administration approved rates less than what CareFirst requested, Burrell hoped that it would make the risk pools more favorable.  Combining higher premiums and increasing losses does not bode well for the future of the market, he said Friday.

“The higher they go, the more likely you get the dis-enrollment of the healthy people and it’s hard to know how that will turn out,” he said. “You have the worst of all worlds now. … That’s just not the definition of a viable market.”

Because CareFirst’s rate request was so high, the insurance administration contracted consulting firm Oliver Wyman to conduct an independent actuarial review of the rate request, the first time that’s been done in Maryland history.

Kaiser has also seen substantial losses in the market due to claims outpacing premiums. To date it has lost around $92 million, around 22 percent of its revenue, Redmer said.

Even with high losses in previous years, insurers cannot try to raise rates so high that they would recoup losses from previous years.

“What’s lost is lost,” Redmer said. “We’re not putting a lot of money in the bank to offset losses from prior years.

Even with the increases, Kaiser plans will be priced lower than CareFirst plans.

“Kaiser Permanente is committed to maintaining affordable pricing in the Maryland Health Insurance Exchange,” a Kaiser statement read. “We look forward to introducing more Marylanders to our award-winning combination of care and coverage.”

Burrell pointed to several changes the federal government can make that would help stabilize the individual market. He would like to see a more effective reinsurance program and some federal help in lowering the out-of-pocket expenses consumers have to pay.

While Redmer approved finalized rates for the insurers, there remains uncertainty around what happens if cost-sharing reduction subsidies from the federal government go away. These subsidies go to the insurance companies to help cover some costs for people who cannot afford the premiums.

President Trump has threatened to kill the subsidies, which he calls “bailouts” for the insurance industry. While they have been paid out under his administration, he has only committed to them month by month and could stop paying them at any time.

Redmer instructed carriers not to consider what would happen if the subsidies were to go away, but added that if they were not provided, premiums could increase by up to 10 percent more.

Redmer also approved final rates for the state’s small group market, which covers around 221,000 people and in which CareFirst is also the dominant player. This market has been much more stable than the individual market and in 2018 will see rate increases averaging less than 2 percent across nine plans.

CareFirst’s underwriting profits in this sector totaled just under $200 million, Redmer said, a clear contrast from the individual market’s losses.


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