Don’t expect as much premium announcement shock for the midterms

Three weeks before the midterms Democrats should not expect to see nationwide headlines of 15% or 20% or 25% rate increases on the Exchanges.  There will be some states and some insurers with those types of rate increases, but there will be a number of insurers with either “normal” increases of less than 10% or actual rate decreases.

Insurers massively overpriced for 2018.

If insurers priced perfectly for 2018, we would expect the following factors to drive premiums for 2019:

• Normal Medical utilization (+7%)
• Repeal of the health insurance premium tax (-3%)
• Repeal of the individual mandate (+10%)
• Proliferation of association health plans and short term underwritten plan rule (+5%)
• Further negative messaging/advertising/navigator cuts against the ACA (0% to 5%)

This produces a net 19% to 24% premium increase on top of the 18% (Gold/Bronze) and 33% (Silver) increases for 2018.

That is not the case.  In Tennessee, BCBST is projecting significant premium decreases (via Holly Fletcher at BirdDog:)

But, BCBST — one of the insurers in the U.S. with the most payments on the line, according to Axios — filed its request on the deadline: It requested an average 10.9 percent decrease although it had planned for an 18 percent decrease until the HHS announcement.

The insurer has been expecting $75.8 million in estimated payments from HHS in relation to the individual and small group plans it offered on the federal exchange for 2017 and 2018, said Danielson.

Insurers seem to have massively overpriced for 2018. We are seeing that with the initial MLR where insurers paid out 68% of their premium dollars in claims for the first quarter of 2018, down from a profitable 75% in 2017 and way down from the high 80s in 2015/2016. We are seeing insurers enter new markets because there is too much money on the table. We are seeing insurers react as if they masively overpriced in all dimensions.

With BCBST, the argument on the cost of sabotage becomes one of a counterfactual — “Prices would have gone down by 20% or 30% instead of 11% if things were different” That is a convincing argument for actuaries and academics. It is not a strong political argument in my mind.