Actuaries Urge HHS: Prevent ACA Marketplace Insurer Insolvency


Should the U.S. Supreme Court in favor of the petitioners in the pending matter of King v. Burwell, health insurance premiums in the ACA Marketplace could skyrocket, according to a letter from the American Academy of Actuaries (the Academy) to Health and Human Services (HHS) Secretary Sylvia Mathews Burwell. At issue in King v. Burwell is the plaintiffs’ contention that ACA premium subsidies should only be available to those who purchase health insurance through a state-run, as opposed to federally-facilitated, exchange.

Most states have opted not to run their own exchanges. If federal tax credits for health insurance premiums cease to be available in federally-facilitated exchanges, those exchanges are likely to see a mass exodus of healthy low-income individuals, despite the imposition of individual mandate penalties, the Academy postulates, which would cause average health care costs, and eventually premiums, to rise.

The Academy is asking the HHS to undertake countering measures to prevent insolvency on the part of health insurers for whom exchange business is a relatively large share of their book of business, especially since premium rates have already been set. One option the Academy presents to the HHS is to allow issuers to submit two sets of contingent premium rates, with one set reflecting appropriate pricing assumptions is premium tax credits are still available, and the other set reflecting pricing assumptions if the tax credits are not available. Then, revised rates could be approved within necessary timeframes in order to implement the rates by the start of open enrollment.

Another option from the Academy is to allow issuers in states with federally-facilitated exchanges increased flexibility to revise and resubmit their rates should the High Court hold that premium tax credits are not available in those states, and the HHS was urged to consider allowing revised filings to be submitted after the May 15 deadline. The Academy points out in its letter that issuers are limited in their ability to change premiums for 2015 and 2016, since 2015 premiums are already in place and ACA regulations prohibit mid-year premium changes.

In addition, issuers must file their 2016 plan year premiums by May 15, 2015, and it is entirely likely that the ruling for King v. Burwell will not be issued before then. The Academy quoted figures from the Urban Institute suggesting that premiums would increase in affected states by 35% if tax credits cease to be available and from the RAND Corporation estimating that if premium subsidies were eliminated in all states, the increase in premium costs would be almost 45%.

SOURCE: Letter from the American Academy of Actuaries, February 24, 2015.

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