- Our 2017 rates are allowing us to earn a margin (profit) for the first time in four years and would have enabled us to propose only a small increase for 2018 to cover expected changes in medical and operating costs.
- However, we have to factor in two significant uncertainties – whether the federal government will fund cost-sharing reductions for low-income members and how the risk pool will change if the coverage mandate is not enforced.
- We are requesting state approval for an average rate increase of 21 percent, but what members pay will vary based on their region, age, income level and plan type.
While the majority of Tennesseans get health insurance through their jobs, or programs like TennCare and Medicare, we cover around 78,000 residents who purchase coverage on their own. If you’re one of them, you may have questions about the future of your coverage.
One of the most common is, “How much will my plan cost next year?”
Today, we submitted our proposed 2018 rates to the Tennessee Department of Commerce and Insurance for their review. We know what we charge has a real impact on our members’ lives, and we want to explain why rates are rising again next year.
Finding balance between the costs of care and coverage
When we started offering Affordable Care Act (ACA) plans in 2014, we had some of the lowest-cost plans in the country because we assumed a large number of young, healthy people would sign up for coverage. Unfortunately, they didn’t – and the medical services required by our new members were more expensive than we’d anticipated.
The risk pool didn’t get better. In fact, we lost $400 million over the course of three years because of the gap between our rates and the costs for medical services our members needed and our costs to operate the program.
We have achieved a better balance with our 2017 rates. And for the first time since the Marketplace launched, we expect to earn a net margin (profit) on individual plans – which is necessary for the long term, even as a not-for-profit company.
How federal uncertainties are affecting 2018 rates
Medical costs continue to rise, and we’re facing additional taxes for this line of business, but our experience so far in 2017 means we would have only needed a small average rate increase.
However, we have to account for two significant uncertainties at the federal level:
- Whether the federal government will guarantee funding for the cost-sharing reduction (CSR) program
- How the risk pool might change if the individual coverage mandate isn’t enforced
First, let’s look at the CSR program.
Here’s how it works:
- Members whose income is between 100 percent and 250 percent of the federal poverty level can qualify for cost-sharing reductions if they purchase a silver plan on the ACA Marketplace. (That’s $11,990 to $29,700 for a single person, or $24,300 to $60,750 for a family of four.)
- The program lowers their out-of-pocket costs, including their deductible and copayments. (This is in addition to the tax credit that helps lower their monthly premiums.)
- We pay the difference (on behalf of the member) and then get paid back by the government.
But there’s a federal lawsuit which argues the government is unauthorized to provide funds to cover those costs. In 2016, the cost-sharing reduction program saved our members $88.9 million.
Unless the government officially authorizes CSR funds for 2018, we have to assume we will be liable for those costs and build them into our rates for silver plans (the only ones that qualify). Overall, this will add around 14 percent to our average rates for next year.
Next, let’s consider the individual mandate.
The ACA requires every American to have health coverage or pay a tax penalty, but the federal government has indicated they may not enforce it.
Without the mandate, some people who don’t have major health care needs will choose not to purchase coverage in 2018. When healthier members leave the risk pool, the costs of care are spread among fewer members. To make up for that shift, we are adding another 7 percent to our average rates.
How our 2018 rates will vary across plan types
Combining those two factors leads to an average 21 percent rate increase – but the nature of an average is that it doesn’t affect everyone the same way.
Health insurance rates also take into account region (because medical services have different costs in different areas) as well as age and plan type. For ACA plans, tax credits also play a role in how much each member is responsible for paying each month.
- Rate increases for silver plans will be higher than the 21 percent average because those are the only plans where we have to account for the uncertainty of the CSR program.
- Rate increases for bronze and gold plans will only be in the 3-8 percent range. Those increases are mainly because of how the risk pool could change if the mandate isn’t enforced.
Because of how the federal tax credits work, we expect many Tennesseans who qualify will have at least one plan option with a $0 monthly premium.
When it comes time to sign up for 2018, members should carefully consider their plan choices – perhaps with the help of a certified application counselor, an enrollment assistor, or a licensed broker or agent.
Where we’re offering individual plans
For 2018, we intend to offer coverage in 81 of Tennessee’s 95 counties, or 6 of the 8 “rating regions” established by the ACA.
When the ACA Marketplace launched in 2014, we were the only insurer to sell plans statewide. But with $400 million in operating losses over three years, we faced the difficult but necessary decision to scale back our reach for 2017.
We wanted to make sure every Tennessean would have at least one option for coverage, so we took a careful approach to where we continued offering plans. And earlier this year, Humana announced that it would exit Tennessee’s ACA Marketplace for 2018, so we decided to re-enter the Knoxville market.
What happens next
The Tennessee Department of Commerce and Insurance will review our proposed rates – along with detailed data on the medical claims costs we’ve covered for members.
It’s worth noting that the ACA requires health insurers to spend at least 80 percent of premium dollars directly on medical services or pay rebates to members. That’s a legal mechanism to protect consumers, but as a not-for-profit, we’ve always aimed to meet or exceed that target.
We’ll continue monitoring legal and regulatory changes at the federal and state level before we finalize our plans in late September. If a new law is signed that changes the risks we’ve identified, we may revise our proposed rates or plan options.
Finally, you can count on us to share news and information directly with you here.