Sign In
Free Newsletter
Evergreen and Kaiser make case for higher premiums in Md.
Evergreen Health and Kaiser Permanente made their case for health insurance rate increases at a Maryland Insurance Administration hearing Monday, citing high costs, CareFirst’s rate increase request of 50 percent and federal discussions around health care.
Initially, Evergreen and Kaiser had filed for lower rate increases, 28 percent and 18 percent, respectively. But the companies refiled after CareFirst’s request. Evergreen refiled for a 65 percent increase while Kaiser refiled for a 25 percent increase.
Maryland Insurance Commissioner Al Redmer said he expects to make a final decision on the rates by mid-August.
Both Evergreen and Kaiser, like CareFirst last month, argued that the biggest cause of their rate increases was the losses they were seeing on the individual market.
Under the Affordable Care Act, insurers who see a medical loss ratio — the percentage of medical payments made compared to premiums — of less than 80 percent must provide a refund to consumers.
But in Maryland, the costs to insurers have been much higher. Evergreen and Kaiser said their loss ratios were higher than 100 percent, meaning they paid out more in medical costs than they took in in premiums.
Kaiser said its medical loss ratio over the four years of the Affordable Care Act has been 122 percent. For every dollar the company was paid in premiums, it paid out $1.22 of medical costs.
“Kaiser is committed to remaining in the individual market, but we cannot do so at these losses,” said Sheila Schroer, executive director and chief actuary for Kaiser’s mid-Atlantic Region.
Kaiser’s initial 18 percent rate increase was intended to help cover those losses, before it re-filed for a higher rate request after seeing the other insurers’ higher increases.
Following CareFirst
For Evergreen, CareFirst’s higher rate request caused a re-evaluation of their own rates. Evergreen did not participate in the market in 2017 because it was in the process of converting to a for-profit insurer from an Affordable Care Act coop insurer.
“The difference between the original filing and the second filing is we saw information from carriers actually participating in the 2017 market,” said Jill Van Den Bos, a principal and consulting actuary at Milliman, which helped Evergreen compile its rate request.
Van Den Bos said CareFirst’s filing was particularly informative because it holds two-thirds of the individual market.
“It would have been remiss for us not to look at (CareFirst’s request) and re-evaluate the market morbidity,” she said.
Kaiser also responded to CareFirst when it refiled for higher rate increases than previously requested.
Primarily, Kaiser was concerned that it would lose more money through risk adjustment payments with CareFirst’s high increases. Under the Affordable Care Act, insurers make risk adjustment payments if they have a healthier risk pool.
In making its initial filing of 18 percent, Kaiser intended to produce a positive contribution to its reserve, Schroer said. In that filing, Kaiser had assumed the other insurers would ask for an average increase of 9 percent. Instead, their increases averaged 38 percent, a number that rose to 44 percent after Evergreen refiled.
Enforcing the individual mandate
One driving factor in the high rate requests from CareFirst and Evergreen has been the uncertain future of the individual mandate, requiring individuals to have insurance. President Donald Trump’s administration has signaled that it will not enforce the mandate.
Evergreen said that lax enforcement of the mandate accounted for 18 percentage points of the 65 percent increase.
“A weakened mandate will lead to adverse selection as healthy individuals decide not to participate in the risk pool,” Van Den Bos said.
While the mandate had already been “softly” enforced, she said the discussion about not enforcing the mandate “makes it even weaker.”
Unlike the other two insurers, Kaiser did not consider enforcement of the individual mandate in its rate request.
“The individual mandate has not been enforced since day one,” Schroer said. In Kaiser’s thinking, “It’s not going to materially change the market. People are still going to purchase insurance because it is the right thing to do.”
Former Maryland Insurance Commissioner Beth Sammis, speaking as a board member of consumer advocacy group Consumer Health First, argued that raising rates based on “conjecture” over what changes might occur at the federal level was not appropriate.
“Higher premiums will do more to drive people out of the market than the chatter we’ve been hearing the past six months,” she said.
