Md. insurers say reinsurance program has stabilized market

Al Redmer, commissioner of the Maryland Insurance Administration. (The Daily Record / Bryan P. Sears)

A reinsurance program introduced last year has stabilized Maryland’s individual health insurance market, leading to smaller rate changes than otherwise would have been expected, insurers said at a public hearing Tuesday.

With the reinsurance program, insurance pools have become younger and healthier, allowing rates and plans to become stable, the insurers said.

CareFirst BlueCross BlueShield and Kaiser Permanente are the two carriers with plans on the individual market, which covers about 201,000 people. They filed their proposed rates for 2020 in May.

The insurers presented their rate changes at a public hearing of the Maryland Insurance Administration. The rate requests have already changed some from the initial filings. The administration and insurers will continue to negotiate the rates until late August or September, when Maryland Insurance Commissioner Al Redmer determines final rates.

“Obviously, by the proposed rates for 2020, the carriers have had improved experience, stability in the market,” Redmer said. “We will continue our work and hopefully see the rates become more favorable.”

The reinsurance program, which required a federal waiver, allows carriers to be reimbursed for some high-cost claims, bringing down the cost of insuring the sickest people and making insurance more affordable for everyone.

The program was funded by a state assessment on carriers. The program is also funded by federal pass-through money, funds the federal government saves by paying lower subsidies because of lower premiums.

Peter Berry, CareFirst’s chief actuary, said that before reinsurance when people left the market they generally left sicker people behind in the pool. But this year in the company’s flagship HMO products, the pool was about as healthy as it was the year before.

“(The people who left) were about the same illness burden as people who stayed,” he said. “That is a quantitative measure of stability that shows that this (reinsurance program) is working.”

CareFirst initially filed for average rate decreases of 8.9% for its HMO plan. After going through discussions with the insurance administration since that filing it now expects a 10% decrease. 

CareFirst also filed for an average rate increase of 9.1% for its PPO plan. After discussions with the insurance administration, that increase is now at a 6.8 % increase, and Berry said he expects the final rate increase to end up below 5%.

Kaiser filed for an average rate increase of 3.9% for its HMO plan. David Lambert, Kaiser’s actuary, said that after discussions, the company’s rate increase request is now at about 2%, almost all of that increase driven by inflation.

These rates presented a different story than last year’s hearing, which was before the federal government approved the reinsurance program. All the carriers requested significant rate increases before the reinsurance, including a 90% request on CareFirst’s PPO plan. After the reinsurance program, rates decreased across the board.

Todd Switzer, the Maryland Insurance Administration’s chief actuary, explained how the reinsurance program implemented last year has helped improve stability in the individual market.

“The way we’re defining working, one of the next steps in this process of stabilization is attracting a pool that is younger and healthier,” he said. Last year’s new members were about 3.4 years younger on average than people already in the insurance pool.

But there is still missing information: how this year’s claims will play out with the reinsurance program. That information may not be clear until the end of the year.

“Demographics are not the same as claims,” Switzer said. “We really need the rest of the picture that way.” 

Small group carriers also explained their rate changes to the insurance administration.

The small group market covers about 268,000 people. Across the nine plans on the market, carriers requested an average rate increase of 4.3%.