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Actuary Sizes Up 2018 Individual Health Picture

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Dave Dillon, a health insurance actuary who did a good job a year ago predicting what the 2017 individual health insurance market would be like, now says it’s too soon to know what products will be on the shelves in 2018.

Dillon, a fellow of the Society of Actuaries who produces health market podcasts for the SOA, said Wednesday in an interview that he thinks there are possible reasons for cautious optimism if market rules and programs stay reasonably stable, along with obvious reasons for concern if the parameters change dramatically, or if the parameters continue to be unclear.

(Related: ACA World 2017: Rates might not be THAT bad)

Health insurers are busy developing 2018 product filings, both for the Medicare Advantage market and the commercial health insurance market, Dillon said.

For health insurance actuaries, “it’s all hands on deck,” Dillon said.

Dillon, who helps state insurance regulators review major medical filings and helps insurers develop filings for other types of products, warned against expecting to see a strong supply of individual commercial major medical products available in 2018 simply because many carriers submit initial product filings.

Depending on what Congress and the courts do, many carriers could submit product filings early on, then announce later that they will withdraw from the market, Dillon said.

Here are more highlights from the interview.

Crystal ball (Photo: Thinkstock)

Crystal ball (Photo: Thinkstock)

1. The individual market may have done reasonably well in 2016.

Dillon said he has tried to get a sense of how individual products really did last year by reviewing the results posted by some Blue Cross and Blue Shield plans.

“I was a little pleasantly surprised by the loss ratios,” Dillon said. “The market didn’t look quite as bad as I might have feared.”

(Related: 7 Threats to Supplemental Health in the Major Medical Storm)

Some carriers did poorly, but typical ratios of claims to premiums, or medical loss ratios, were under about 83%, Dillon said.

Enrollment held up well, in spite of rate increases, he added.

2. The underlying trends could lead to 2018 increases that are ugly, but not catastrophic.

The underlying medical cost trend could lead to an increase of 6% to 10%, and the ACA health insurance tax could add about 2% to premiums, Dillon estimated.

That could lead to an overall typical increase of somewhere between 10% to 20%, along with an adjustment for each carrier’s own experience, Dillon said.

The Congress are now deciding how the ACA will work in 2018, and the courts are deciding whether the U.S. government has to pay insurers cash owed by the ACA risk corridors program, a troubled ACA program that was supposed to help smooth over insurers’ ACA-related financial problems, and payments owed by the ACA cost-sharing reduction subsidy program. The program helps low-income ACA exchange plan users handle their deductibles, co-payments and coinsurance bills.

The New York Times reported Wednesday that President Donald Trump met with health insurance executives on Tuesday and left them unclear about what will really happen to the subsidy program.

The effect of the elimination of the cost-sharing reduction program could be enough to chase some carriers from the market, Dillon said.

3. Regulators seem to be behaving in a rational fashion.

Many state insurance regulators have pushed 2018 product filing deadlines back as far as the federal government will let them, and the Centers for Medicare & Medicaid Services, the arm of the U.S. Department of Health and Human Services in charge of ACA commercial health insurance rules and programs, has posted what appear to be helpful regulations and guidelines.

Dillon likened the CMS efforts to “tightening the lugnuts” of a train in danger of running off the tracks, but he said he thinks the efforts have been positive. 

4. Insurers could create emergency backup products quickly, if regulators let them.

Dillon said there is room for hope if policymakers fail to resolve the ACA problems but do give insurers room to come up with substitutes for the current individual major medical products.

ACA rules transformed the products in January 2014 and imposed many benefits requirements and operating limits, such as a ban on almost all forms of medical underwriting.

“The pre-ACA world was not that long ago,” Dillon said.

Many carriers still have employees who know how the pre-ACA products worked, and many sell products such as hospital indemnity insurance, accident insurance or critical illness insurance that could be tweaked to fill a void in the individual major medical market, Dillon said.

Some insurers might offer stripped-down products, rather than full major medical products, and some might try to control the costs of offering true major medical coverage by returning to medical underwriting, if they were allowed to do so, Dillon said.

Many medical insurers offer non-ACA products, such as critical illness insurance, that still rely on traditional medical underwriting, and even the newer insurers that have never used medical underwriting for sales purposes have had to go through a detailed enrollee health status analysis process internally, Dillon said.

The carriers go through that analysis process to participate in the ACA risk-adjustment program, Dillon said.

The ACA risk-adjustment program is supposed to shift cash from individual and small-group issuers with low-risk enrollees to issuers with high-risk enrollees.

— Read Senate Confirms Seema Verma as CMS Administrator on ThinkAdvisor.


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