Some health insurers in Michigan will be seeking record-level rate hikes next year for plans they sell to individuals — potentially as much as 31% — as debate continues to swirl in Washington over overhauling the Obama-era Affordable Care Act.
Today is the deadline for insurance companies to submit to Michigan regulators their proposed 2018 premiums for health plans that can be bought on or off the Healthcare.gov exchange, as well as for small groups of 50 or fewer employees.
While not all insurance filings are yet available, several of them call for sharp rate hikes in the individual market that would mean a direct hit to some Michigan households and indirectly affect taxpayers as the ACA's government subsidies then expand to cover the new, higher rates.
Blue Cross Blue Shield of Michigan, the largest insurer in the state, says it is looking to boost its individual plan rates by a statewide average 26.9% and an average 13.8% for Blue Care Network HMO plans.
Those spikes could be even higher — 31.% and 22.6%, respectively — if Republicans in Washington opt to defund cost-sharing subsidies in the ACA for helping lower-income people with medical costs.
Either way, Blue Cross has never before sought rate increases of this magnitude for its individual plans, spokesman Andy Hetzel said. Premiums for individual plans across all Michigan insurance companies increased an average of 16.7% this year from 2016, and 6.5% from 2015 to 2016.
In contrast, Blue Cross is seeking far more modest rate increases for small group plans in 2018: a 5% statewide average increase for "preferred provider organization" rates, or PPOs, and an actual rate reduction of 3% for HMO policies.
Blue Cross covers about 260,000 of the approximately 360,000 people in Michigan who get insurance through a small group policy.
That vast difference in proposed rates in the individual and small group markets underscores the volatility problems plaguing the individual market, created in its current form by the 2010 Affordable Care Act, commonly known as Obamacare.
“This is not because of the underlying health care cost trend going up that much," said Marianne Udow-Phillips, executive director of the Ann Arbor-based Center for Healthcare Research & Transformation.
Rick Notter, Blue Cross' director of individual business, cited several key reasons for the unusually large rate increases being sought for individual market plans:
- Skyrocketing drug prices: Prescription drug costs have grown 73% for Blue Cross in the past seven years. The average cost of a specialty drug is $54,000 per year. Only 5% of individual members use specialty drugs, yet they account for 50% of all Blue Cross pharmacy costs.
- People dropping coverage after getting procedures: About 20% of Blue Cross enrollees stop paying their premiums after receiving services or procedures. This gambit drives up costs for people who stay insured.
- Young people staying out: Younger, healthier people are not signing up, leaving older people with higher costs in the insurance pool. People are generally supposed to pay a penalty if they go uninsured for more than three months.
- Insurers leaving Michigan's individual market or paring back offerings: There were 16 insurers in the individual market in 2014, but nine this year. And Blue Cross is now the only insurer on the individual exchange with "preferred provider organization" plans, or PPOs, which offer a wider choice of medical providers. Most other plans have narrow provider networks.
To be sure, the proposed rates do not reflect what many individuals would actually have to pay in 2018. Just over 80% of Michiganders who buy health insurance on the individual market qualify for the ACA's tax credit subsidies intended to make the policies affordable.
The subsidies are based on a percentage of an individual's income and family size. That means if the sticker price of one's insurance premium goes up, so will his or her government subsidy.
But subsidies are only available for those with incomes no higher than 400% of the federal poverty line, which for the 2016 income year was $47,080 for one person, $63,720 for a family of two and $97,000 for a family of four.
Overall, fewer people have been signing up for individual health plans in Michigan. Total enrollment fell from 345,813 in early 2015 to 284,433 this year, according to federal data. Blue Cross policies currently cover about 215,000 of those enrolled.
The Blues continues to sell individual plans in all 83 Michigan counties, despite losing $68 million last year on individual policies. Several places in Ohio, Missouri and Washington state reportedly could have zero individual plan options in 2018.
Grand Rapids-based Priority Health is seeking an average rate increase of 17.7% for its individual policies, or 19% if cost-sharing subsidies aren't continued. Priority Health insurers 113,000 individual-market customers.
Health Alliance Plan has asked to raise individual plan rates 16% to 24%, depending on cost-sharing subsidies. That increase would affect 17,000 HAP customers, according to its rate proposal.
Total Health Care, which insurers nearly 9,000 people on the individual market, is seeking average rate increases of 27.6%, according to filings that assume the cost-sharing subsidies will end.
Representatives for other health insurers in Michigan either declined to share their proposed rates or did not respond to Free Press inquiries.
Humana, which has insured about 20,000 people in Michigan on individual plans, recently announced that it will stop offering individual plans here and in the other 10 states where it currently does, citing "an unbalanced risk pool."
Udow-Phillips said political factors are also likely driving the extraordinarily high rate increase requests.
She noted how the Trump administration suggested early this year that it wouldn't enforce the ACA's individual mandate to buy insurance, although more recent press reports indicate the IRS has indeed enforced the requirement. The penalty for not buying insurance is $695 for an individual or 2.5% of income, whichever is higher.
Approximately 209,000 Michigan households paid a tax penalty in 2015 for not having insurance.
“The word kind of got out that the penalties weren’t going to be enforced," Udow-Phillip said, a public perception that may be depressing enrollment.
Another possible reason for the rate spike could be people rushing to get expensive medical procedures done now, before any major changes happen to the health care law.
This spring, the U.S. House passed what is being called the American Health Care Act, which would repeal the ACA and replace it with legislation that would save some $119 billion over 10 years but also result, according to an estimate by the nonpartisan Congressional Budget Office, with an additional 23 million people going uninsured by 2026.
The House bill faces an uncertain future in the Senate, however, with Republican legislators there meeting in private to craft their own Obamacare repeal and replacement bill, the details of which are still unknown.
“I think that a lot of elective surgeries that might have been pushed off, people are getting now because they’re afraid they’re not going to have insurance," Udow-Phillips said.
The Michigan Department of Insurance and Financial Services is responsible for reviewing, scrutinizing and approving all of the requested rate changes, which would go into effect for the next open enrollment period set to begin Nov. 1 and end Dec. 15. Average rates were shaved down 0.5% last year in the review process.
The department asked insurers to submit two sets of rate proposals this year, one for business as usual and the other should the ACA's cost-sharing subsidies be discontinued.
In 2016, the cost-sharing subsidies amounted to $166 million in federal dollars paid to Michigan insurance companies to help people with incomes up to 250% of the federal poverty level afford co-pays and other medical costs.
"If we don't have that cost-sharing (subsidy), we have to make up the difference and the only way for us to do that is with a higher rate," said Blue Cross' Notter.
A common complaint about individual health plans is their high deductibles, which is the amount consumers must spend before the insurance fully kicks in.
Deductibles for 2017 "Silver" plans sold in Michigan through Healthcare.gov ranged from $0 to $5,400, with an average deductible of about $2,800, according to an analysis by the Center for Healthcare Research & Transformation. Silver plans cover 70% of health care expanses until a consumer reaches his or her plan's out-of-pocket maximum.
To prevent profiteering by insurance companies, the ACA required insurers to spend no less than 80 cents out of every dollar of premiums on actual medical care rather than administrative costs, marketing, executive bonuses and other expenses. This measurement is their "medical loss ratio."
Blue Cross reported an 88% medical loss ratio in 2015 and 82.5% for its HMO, according to the most recent data.