Insurance companies that are planning to sell Obamacare plans in two state exchanges next year are requesting double-digit rate increases for premiums, results that are likely to become fodder for the healthcare law's defenders and its detractors.
In Maryland, insurers requested average rate increases between 58.8 percent and 18.08 percent. In Virginia, insurers have requested rate increases of 30.6 percent on average, according to an early analysis by Charles Gaba, an independent analyst and writer of ACASignups.net.
The rates, which must be approved by a state's department of insurance, apply only to unsubsidized plans and do not yet indicate a trend. Still, Republicans have in the past used rate increases as justification for their argument that Obamacare is failing and needs their intervention, while Democrats have countered that these types of issues stem from Republicans introducing too much uncertainty into the market.
A review of submitted documents reveals that several factors have contributed to these results, including increasing prices for drugs and medical care, a sicker and more expensive pool than expected, fewer people enrolling than anticipated, and the re-implementation of the health insurance tax, which itself would increase premiums by between 3 and 5 percent.
"These could be factors completely independent of which administration is in charge," said Cynthia Cox, associate director of the Program for the Study of Health Reform and Private Insurance at the Kaiser Family Foundation.
But uncertainty about how the administration will enforce the law by encouraging people to sign up for coverage is also a factor, experts say, though this isn't spelled out in the written descriptions available.
"The biggest factor is the general uncertainty," said Tim Jost, a health law expert and emeritus professor at Washington and Lee University. "If I were a health actuary I would get the highest number I could think of ... I think insurers just need some certainty right now and until they get it rates are going to be very high."
Under Obamacare, most customers who sign up for these plans will receive a tax subsidy to make up for price difference, and won't personally feel the impact of the premium hike. Full premium increases, however, could affect anyone who makes more than $48,240 for an individual and $98,400 for a family of four.
The threshold also can vary depending on whether a person's medical expenses make up 9 percent of their income. Either way, the initial sticker shock can become ammunition for argument on both sides of the aisle.Insurers who plan to exit exchanges next year have cited both uncertainty and massive losses as contributing to their decision, but it's not clear that they would cite this factor in the written descriptions they include with their rate requests, which detail not only what they propose to charge customers for policies but what factors play into their requests.
"It wouldn't have been something they'd have to write about before," Cox said. "It's not clear this is the venue they would express that. To factor rates you have to have an actuarially justifiable reason. Insurers are making appropriate assumptions based on who is signing up, how much they use healthcare and what the prices are."
In Virginia, Anthem said in its explanatory document that its request to increase premiums by an average of 37.7 percent was rooted both in past trends of having higher medical costs, and knowing that some customers might opt for not purchasing the plans because the individual mandate, which obligates people obtain insurance or pay a fine, is less expensive than paying premiums for a year.
"Prior experience has exhibited market shrinkage and morbidity increases year over year," the company wrote. "Anthem is forecasting an acceleration of the current trend where individuals with greater healthcare needs are more likely to keep their coverage in a guaranteed issue market with rating constraints and an individual mandate that maintains a penalty that is far smaller than the cost of coverage for most individuals."
The rate proposals reviewed for Maryland and Virginia reflect the assumption that the federal government will continue to pay out Obamacare's cost-sharing reduction subsidies, even though President Trump has said he doesn't know what the long-term plan is for the funds, which are expected to total $7 billion this year.
Some companies stated that they are leaving the door open to submitting updated rates if the funds aren't paid, or to leaving the exchange entirely. Rates could increase by another 20 percent if the funds aren't paid.
Still, increasing rates predate the Trump administration. In the fall of 2016 the government announced that mid-level plans would increase by an average of 22 percent, leading to claims from Republicans that Obamacare wasn't working and was "collapsing under its own weight."
Democrats blamed insurers for initially charging too little for plans, and said that GOP sabotage of payments to insurers was also to blame.
A Standard & Poor analysis of the 2017 rate increases suggested they marked the beginning of stabilization, but also assumed that insurance subsidies would continue to be paid and that the government would enforce the individual mandate.
For now, the government hasn't changed the individual mandate, but a bill that passed in the House this week would undo it, and reports revealed that the Trump administration earlier this year reduced government outreach to customers during the last two weeks of open enrollment, contributing in part to 1 million fewer sign-ups for plans than expected.
Deep Banerjee, director and sector lead of global ratings at S&P, said he doesn't expect that rates will increase by similar averages in 2018, though he adds that it's possible given that insurers don't know how dedicated the administration will be to promoting open enrollment or enforcing the individual mandate. This could affect how many people sign up and how healthy they are.
He said rates otherwise are expected to increase by an average of single digits to low teens. A couple of insurers who filed rates in Virginia asked for rate increases below 10 percent. California and Connecticut had filing deadlines this week, but the results have not yet been made publicly available.
"There will be outliers, we will have to see once all the filings are in what the average rate increase is," Banerjee said. "If at the end of the day we find out that they are all high on average then you would question how much of that is based on what they are expecting because of uncertain times."
Kevin Lucia, a research professor and project director at Georgetown University's Health Policy Institute, said in an email that the proposed rates would likely be adjusted downward, sometimes significantly, following a state's rate review.Maryland also reminded the public in a statement that the rates haven't been finalized.
"It's important to remember that these rates are what companies have requested, and not necessarily what will be approved," Al Redmer, Jr., the state's insurance commissioner, said in a statement. "There will be a thorough review of all the filings. As in years past, we may require changes."
The rate increases may also reflect that despite initial analyses, the market still will require more time to reach stability. Last year some states saw slight decreases in final rates."There are signs that the market is improving or stabilizing but that doesn't mean it's there yet," Cox said.
As Republicans and Democrats continue to debate the future of healthcare policy, medical costs continue to rise. Health insurance companies are analyzing how to pay for Obamacare's exchange population, which uses healthcare services often and has greater medical needs. Unexpected drug increases play into the rates as well.
"The underlying costs of healthcare in the U.S. remains high, and that is not necessarily going to change because of the regulations they are looking at," Banerjee said.
Washington Examiner's Robert King contributed to this report.
Editor's note: The 2018 income data regarding subsidy qualifications in this story has been corrected.