I spent too much of my weekend on a highway so I had time to get cynical about Cost Sharing Reduction (CSR) subsidies and rate filings.
Charles Gaba at ACA Signups notes the increasing attribution of increased individual market premiums due to policy uncertainty.
And finally, you have this press release from the Pennsylvania Insurance Commissioner, which applies to all 5 carriers collectively: 8.8% increase if not for Trump/GOP sabotage, up to 36.3% with it added. That means that the worst-case scenario would mean a “Trump Tax” of 27.5%…or 3/4 of the overall rate increases.
I noted in March that all of the incentives were set up for high rate filings.
So how do the incentives align?
Filing actuaries hate being wrong. They hate being wrong the most when it costs their employers money and them their jobs. They have every reason to file high. The reviewing actuaries don’t want to be wrong but they have a public trust component to their job where they need to make sure that the filing entity will be an ongoing viable business while not taking too much advantage of the public.
Republicans want high rates to be filed. It gives them a good headline when they’ll need one to keep their base in line. Insurance company executives won’t mind giving them a good headline as it is a low cost favor…
State insurance commissioners of either party won’t mind high filings. They will be able to issue press releases and have interviews where they can clearly, cleanly and honestly state that due to their work, the initial rates came down by 50% before Open Enrollment.
The players with the ability to influence rates all have a shared incentive to have initially hideous numbers filed in June and then see hideous shaved down to merely bad for the first day of Open Enrollment in November.
I was not thinking the scenario through far enough.
With the assumption that the 2019 individual market will be an exchange based market of some sort, what are the headlines in October 2018 if there is a bill that fully funds CSR subsidies that is signed in March 2018?
“What a great deal, insurance premiums go down 8%”
There is a strong incentive for CSR to be funded with 100% certainty before the 2019 rate filing process is even started at the carriers that may be offering plans on any exchanges. The absence of a potential demolition charge will drop rates significantly. And since those rates will drop a week before the election, the incentive is for Republicans, who are worried about their seats, to pass a bill that will give them a great headline as everyone gets ready to go to the polls.