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Before reinsurance, significant premium increases sought on Md. individual market

Maryland Insurance Commissioner Al Redmer. (File)

Maryland Insurance Commissioner Al Redmer. (File)

Insurers on Maryland’s individual health exchange are proposing to raise their rates by an average of more than 30 percent, as hopes for stabilizing the market increasingly depend on the state’s application for a reinsurance program. 

The increasing rates could continue to make insurance more unaffordable for many Maryland families and force more healthy people off the exchange, a problem that has made the market unstable. A plan to create a reinsurance program in Maryland could help lower the proposed rates and stabilize the market, but even that would be a short-term fix.

“I believe we have been in a death spiral for a year or two, and we are hopeful with the approval of a waiver for a reinsurance program that would moderate or improve,” said Al Redmer, Maryland Insurance Commissioner. “Even with a waiver or a reinsurance program, this is a short-term solution.”

Lawmakers and some insurers hope the reinsurance program will help decrease the premium requests by as much as 30 percentage points, but Kaiser Permanente expressed concern last week that the reinsurance benefits would not be spread among all insurers equally.

CareFirst BlueCross BlueShield filed to raise rates an average of 18.5 percent on its HMO products and an average 91.4 percent on its PPO products, which tend to cover a smaller, sicker population. Kaiser asked to raise its rates an average of 37.4 percent.

Under these increases, the average male 45-year-old nonsmoker would pay about $546 a month for the CareFirst HMO product, $1,344 a month for the CareFirst PPO product and $518 a month for the Kaiser product.

Compared to the individual market, Maryland’s small group market has remained stable. The average increase request from insurers was 6.8 percent, with filings ranging from -1.8 percent to 15.6 percent.

That small group market covers more people than the individual market in Maryland, about 265,000 people. The number of people in this market tends to be more consistent than the individual market, which can be transient as people move into jobs that offer health benefits.

Both small group and individual rates will receive a public hearing in July before Redmer decides to approve the rates or set different rates as part of the rate review process.

Insurers on the individual market are expected to revise their rate filings if the federal reinsurance waiver is approved.

When the individual market debuted in Maryland, CareFirst was the dominant insurer, covering 94 percent of people on the exchange. But as CareFirst’s rates have skyrocketed and other insurers left the exchange, the insurer nearly split the market with Kaiser, 55/45, after the 2018 open enrollment period.

The CareFirst and Kaiser HMO products cover nearly 200,000 people combined, a significant majority of the individual market. CareFirst’s PPO market covers around 13,000 people. That population tends to be much sicker and cost significantly more than the people in the HMO pool.

CareFirst hopes more people in the PPO pool choose the HMO pool, said Chet Burrell, the company’s president and CEO.

If Maryland’s reinsurance application receives federal approval, CareFirst anticipates rates decrease by 20 to 30 percentage points. With reinsurance in place, rates on the insurer’s HMO product could remain flat or even decrease.

“Our hope is that the (reinsurance) legislation in Maryland will actually stabilize the premiums going forward,” Burrell said.

But Kaiser raised concerns last week that the reinsurance proposal would not equitably affect all carriers, instead sending more money towards CareFirst after the risk adjustment money it gets paid by Kaiser.

If nothing in the current proposal changes, Kaiser could be forced to raise rates instead of cutting them, company executives said.

Carriers have raised rates in recent years to compensate for losses on the individual market. Through this year, CareFirst is projected to lose about $436 million, Burrell said.

To make up for those losses, insurers must raise premiums. And when premiums increase more people tend to leave the market.

The problem for the insurers is that those people tend to be the youngest and the healthiest; the people who have the fewest expenses. People who do not qualify for subsidies often pay as much or more for health insurance as they spend on their mortgages, Redmer said.

“We are at a place in the individual market where any increase at all creates stress in the marketplace,” he said. “While an 18 percent increase is better than last year, it is still in some cases catastrophic if you are the young family that has got to pay that increase.”

The sickest people in the pool tend to cost around $70,000 a year, Burrell estimated. The healthy people cost a couple hundred dollars.

But those healthy people end up paying higher premiums to compensate for the increasing number of high-cost pool members.

“If you are insuring only burning houses, you wind up with rates that are essentially unaffordable,” Burrell said.

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