Obamacare Uncertainty Could Drive Up Marketplace Healthcare Costs in 2018

Reinstated premium tax could also add hundreds to individual premium prices

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Uncertainty over the future of Obamacare is leading many health insurance companies to consider significant rate hikes for plans offered next year on the federal marketplace, while a regulatory change could add hundreds of dollars more to the cost of coverage.

A recent analysis by the Kaiser Family Foundation suggested that lingering political and policy questions have driven three out of four insurance companies surveyed to predict double-digit premium increases for policies offered on the Affordable Care Act marketplace in 2018. In Wilmington, DE, the cost of the most popular option could rise nearly 50 percent, and several cities saw hikes of at least one-third; however, rates could also decline in a handful of locations.

The study of preliminary premium filings for silver-level plans in 21 cities did not include New Jersey, but experts said that while local market conditions are unique, insurance companies here face the same concerns over the impact of potential reforms to the ACA, or Obamacare. Insurers have until late September to decide if they will participate in the Healthcare.gov marketplace and file their rates with federal regulators.

“Health plans crave certainty and clear guidance and right now they don’t have either,” explained Ward Sanders, president and CEO of the New Jersey Association of Health Plans, which represents insurance providers. “It has made it very difficult for them to file rates for 2018, and has the potential to cause disruption for consumers.”

Significant spikes?

There have been previous warnings that rates could spike significantly. In June, some insurance companies predicted similar increases for policies sold outside the marketplace, which require earlier rate filings. Residents of Maryland were warned to brace for hikes of 50 percent, while Connecticut faced prices that could be 34 percent higher.

The situation is compounded by the anticipated return of a health insurance tax that was all but suspended last year, which is scheduled to be re-instated in 2018. The tax was implemented as part of the ACA in 2010 to help pay for expanded coverage offered through the landmark law, which added nearly 800,000 Garden State residents to the insurance rolls.

While insurance companies pay the federal fee, the cost — predicted to top $22 billion nationwide next year — is passed on to more than 100 million policy holders, according to an analysis commissioned by a national group lobbying to oppose the tax. Several Republican efforts to reform Obamacare have proposed eliminating various taxes associated with the law, but the premium fee is scheduled to return.

A big hit

The group, Stop the HIT (or Health Insurance Tax), said for New Jersey residents, the return of this fee would add nearly $250 a year to the cost of policies for seniors and disabled residents; more than $550 per family for small business owners and their employees; and more than $600 for families covered through larger businesses. It will also cost the state nearly $270 more for each Medicaid member.

GOP leaders in Congress, with backing from President Donald Trump, tried several approaches to repealing and replacing Obamacare in recent months, but the initial push failed to gain Senate approval in late July. Trump continues to push for legislative action, but it is unlikely federal lawmakers will take any major action soon.

A bipartisan effort is now underway to improve aspects of the ACA marketplace, which sells highly regulated commercial insurance plans to customers who earn too much to qualify for Medicaid, but receive federal subsidies to offset the costs. This insurance exchange now insures nearly 300,000 New Jersey residents, more than 80 percent of whom get public help in paying for the plans.

Various Republican reform proposals sought to improve marketplace performance — some states have little to no competition among insurers and premiums continue to be unaffordable — by easing restrictions on insurance companies. The controversial measure that passed the U.S. House in May would have eliminated the least popular Obamacare element — the personal mandate, requiring taxpayers to purchase a policy or pay a fine. It also restructured how the federal government funded premium subsidies.

Primary factors behind hikes

While these and other pieces of the ACA remain intact today, the law’s future is uncertain and Trump has not said how much funding he will make available for the subsidy programs, which are also the subject of a lawsuit. According to the Kaiser Family study, these questions about the Obamacare mandate — which helps lower the overall cost of care by forcing healthy people to participate in the market — and the federal subsidy dollars are the primary factors driving the rate hikes.

“Some insurers explicitly factor this uncertainty into their initial premium requests, while other companies say if they do not receive more clarity or if cost-sharing payments stop, they plan to either re-file with higher premiums or withdraw from the market,” the KFF report notes. Insurers in some states were prepared to add as much as 20 percent for uncertainty over the mandate and 23 percent for subsidy questions.

Higher prices aren’t the only potential outcome, according to Sanders of the NJAHP. “There is a lot at stake,” he said in an email. “Depending on how this plays out, the  uncertainty could:  scare away carriers from participating in the market; unnecessarily price some consumers out of the market; increase subsidy costs for government; and/or cause significant losses to health plans forcing them out of the market.”

The direct cost to consumers was the focus of the Kaiser analysis, which showed that a 40-year-old non-smoking man seeking a silver plan on the marketplace in Wilmington, DE, could face a price hike of 49 percent in 2018. The same customer could see prices spike 34 percent in Albuquerque, NM and 33 percent in Richmond, VA, while the cost would remain stable in Burlington, VT and could decline by 5 percent in Providence, RI. In New York City, the premium would rise 10 percent, while it would increase 23 percent in Philadelphia.

In New Jersey, the cost of insuring some 700,000 public workers appears to be headed in a different direction — at least for some employees. The state Health Benefits Commission voted earlier this month to accept a consultant’s recommendations for changes to plans that cover state workers, local and county employees, and public education staff. Several groups will actually see the costs decline in 2018.

While the specifics depend on the type of plan involved, on average current state employees will see premium costs remain stable, while retirees could see their costs decline more than 6 percent. [link:http://www.state.nj.us/treasury/pensions/pdf/hb/rate-renewal-disc-local-gov-2018.pdf|
Local government workers] will enjoy similar changes. But school workers can anticipate higher costs, with prices rising 13 percent for current staff and nearly 16 percent for early retirees. (Former school workers on Medicare will enjoy a decrease of nearly 6 percent.)

Among other things, the changes reflect anticipated savings of more than $200 million to the prescription drug program for public workers. New Jersey switched prescription-benefits managers this year and has signed a new contract with a company that has used new technology to help reduce drug costs for other clients. The state will spend more than $2 billion this year on medications for public workers.