The head of the largest insurer in the Mid-Atlantic region warned Thursday that the Affordable Care Act marketplaces were in the early stages of a death spiral, a statement that came as the company announced its request for massive, double-digit premium increases for next year.
Projecting that by year's end the company will have lost a total of $600 million since it started selling plans in the marketplaces four years ago, CareFirst Blue Cross Blue Shield is requesting a greater than 50 percent rate increase in Maryland, a 35 percent increase in northern Virginia and a 29 percent increase in D.C.
“What we’re seeing is greater sickness levels. The pool of beneficiaries is becoming sicker, in part because healthier people are not coming in at the same level we hoped,” said Chet Burrell, chief executive of CareFirst, which insures about 215,000 people through the marketplaces set up by the Affordable Care Act in all three states.
Burrell said he was worried that the market was in the early stages of a death spiral, in which sick people who need insurance stay in the pool but healthier people drop out, causing insurers to raise rates — driving even more healthy people out of the market.
“We were hoping for more stability. The factors that I have described to you today lead to instability and to a spiral, and we think we are in the beginning of that,” Burrell said.
In Maryland and many other states, insurers file their requested premium rates for the upcoming year. Those requests, many of which are due over the next two months, are reviewed and approved by insurance commissioners before being finalized.
The CareFirst announcement is a worrisome sign for insurers facing deep uncertainties about the political and regulatory environment next year. When large premium increases were approved for 2017, many health policy specialists and supporters of the Affordable Care Act argued those were a one-time correction because companies had priced their products too low when they entered the nascent marketplace. A recent report by S&P Global said the ACA market was not in a death spiral and said that Blue Cross Blue Shield plans broadly had done markedly better in 2016 than previous years. The CareFirst rate request, which is not final, suggests that despite evidence the market is stabilizing, insurers in some areas are struggling and the flux around the future of health care is taking its toll.
The Maryland Insurance Commissioner released rate requests from three other insurers, which ranged from 18 to 37 percent increases. A 40-year-old nonsmoker in the Baltimore area would face premiums ranging from $359 a month to $715 for a benchmark plan, before receiving any federal subsidies.
“It’s important to remember that these rates are what companies have requested, and not necessarily what will be approved,” Insurance Commissioner Al Redmer, Jr. said in a statement. “There will be a thorough review of all the filings. As in years past, we may require changes.”
The rate filings are a starting point for negotiations, but Burrell noted that the numbers could rise. He said his company had made its filings assuming that the cost-sharing reductions, billions of dollars in federal payments that lower out-of-pocket expenses for about 7 million Americans, would be made. Politicians have not committed to making those payments in 2018, and if those go away, premiums could rise another 10 to 15 percent, Burrell said.
Burrell said that his company is committed to the marketplaces and will make “every attempt to continue” selling the plans. He said that the federal government could take steps to stabilize the marketplaces right away by guaranteeing that the cost-sharing reductions would be paid next year and making a strong statement that people would be penalized if they went without insurance.
A day earlier, Aetna withdrew from selling individual insurance in Virginia next year, citing financial losses.