Insurers propose premium increases as subsidy cliff looms
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Insurers propose premium increases as subsidy cliff looms

Insurers in the individual market are proposing significant rate increases for 2023 — a move that will add more pressure for Congress to extend subsidies that help people buy health insurance. 

Insurers say the increases are necessary because they expect more people to make up for doctor visits and procedures they had postponed during the pandemic. They also cite rising health care costs caused by inflation, labor costs and an expectation that some individuals will drop out of the marketplaces because subsidies for some groups of people will expire at the end of the year. 

“Big picture, the trend I am seeing is pretty significant proposed rate increases for 2023,” said Sabrina Corlette, co-director of the Center on Health Insurance Reforms at Georgetown University’s McCourt School of Public Policy.

Insurers have filed rate proposals in about a dozen states so far, with an average increase of about 10 percent, according to acasignups.net, a website that tracks rate filings. 

In Maine, insurers are proposing an average rate increase of 14.7 percent, while Washington, D.C., insurers are proposing an average rate increase of 20.7 percent.

The proposals still need to be approved by state regulators, who are likely to push back on significant increases. Still, the proposed increases are likely to spur more urgency from Democrats to extend provisions that enhance and expand eligibility for subsidies to help people buy health insurance. 

“It’s all the more concerning rates are likely to increase in certain states because the cost to the consumer will be more in absence of subsidies that will make it more affordable to buy insurance,” said Hemi Tewarson, executive director of the National Academy for State Health Policy. 

Premium increases combined with the expiration of the subsidy expansions would fall hardest on people with incomes up to 150 percent of the federal poverty level: about $20,000 per year for one person. 

Under a COVID-19 response package that Congress passed last year, premiums for people with the lowest incomes were fully subsidized and capped at 8.5 percent of household incomes for higher-level earners. 

Increases would also hit hard people making more than 400 percent of the federal poverty level — about $50,000 per year for an individual or $110,000 per year for a family of four — who would have to pay the full price for coverage if the subsidies are allowed to expire on Dec. 31. That group became eligible for subsidies for the first time through the COVID-19 response bill. 

While Democratic leaders in Congress want to extend the subsidies in a reconciliation package that they hope to pass by the end of the month, nothing is certain. 

Sen. Joe Manchin III, D-W.Va., has concerns about the cost of extending the subsidies, telling Business Insider recently they should be reserved for people “who really need it the most.”

Extending the subsidies would increase the federal deficit by $25 billion in 2023, according to an Urban Institute analysis. 

Most Democrats, sensing the impact higher premiums could have on their party in the midterms, have been pushing for more urgency. 

“Health care costs continue to rise, and we must ensure affordable, quality health coverage remains in reach,” Sen. Jeanne Shaheen, D-N.H., and a dozen other senators wrote in a letter to Senate Majority Leader Charles E. Schumer and Speaker Nancy Pelosi last month, urging them to include the subsidies in the reconciliation package. 

The expiration of those provisions combined with increasing premiums would have the biggest impact on older people, whom insurers are allowed to charge more for coverage. 

For example, Corlette said, a 64-year-old earning $52,000 per year has their premiums capped at $368 per month for the cheapest marketplace plan under the provisions. If the provisions expire, that premium could jump to $642 per month under a rate increase being proposed by CareFirst in Maryland. 

About 3 million people would drop their insurance if the enhanced subsidies expire, according to an analysis released in March by the Department of Health and Human Services. 

Black people, young adults and people with incomes between 138 and 400 percent of the federal poverty level would experience the biggest coverage losses, according to an analysis by the Urban Institute.

If Democrats decide to extend the subsidies, timing will be key, experts said. 

While open enrollment begins in November, if Congress acts after rates are finalized Aug. 17, premium increases resulting from uncertainty over the future of the subsidies will already be baked in, experts say. 

“The timing could make it difficult for insurers to incorporate the changes into their 2023 premium rates,” said Barb Klever, vice chairperson of the health practice council for the American Academy of Actuaries. 

A few states, like Missouri, are having insurers file two different rate proposals, but the vast majority of states aren’t doing that. 

Experts differ on how much of an impact people leaving the marketplace would have on overall premiums. The theory is that the end of the subsidies could lead healthy people to leave the marketplaces, leading to higher premiums for the people who continue buying insurance as the costs are spread among fewer people who are more likely to be sicker.

But according to the National Association of Insurance Commissioners, few insurers have cited the expiration of the subsidies as a reason for higher rates. 

Another concern if Congress waits too long is that people could drop insurance after seeing the cost of their premiums without the subsidies. Some states start sending out notices to enrollees in September. 

“Once a consumer reads a notice and sees how much their premiums will increase, that’s when they might make decisions to forgo coverage. And it’s hard to then change course afterwards once those decisions have been made,” said Tewarson. 

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