Health Insurance Premiums to Decline in 2019, CMS Predicts

The Centers for Medicare and Medicaid predicts that health insurance premiums will, on average, go down in 2019. (Rawpixel/Unslplash)

Health insurance premiums are expected to decline on average next year, for the first time since 2014, the year the Affordable Care Act (ACA) went into effect.

The Centers for Medicare & Medicaid Services (CMS) projects that premiums for the second-lowest cost plan sold on the HealthCare.gov website will go down 1.5 percent overall, and by 1 percent for the silver plan that costs the least. The rates are based on premiums for a 27-year-old non-smoker. Silver plans come at different prices.

This is a national average, and some states are projected to still see their premiums increase. North Dakota and Delaware are expected to see 20.2 percent and 16.1 percent increases respectively on the second-lowest silver plan, the highest of all the states, according to CMS data.

But many are also seeing double-digit premium decreases, the largest of which are Tennessee and New Hampshire with 26.2 percent and 15.2 percent decreases respectively for the second-lowest silver plan.

“Despite predictions that our actions would increase rates and destabilize the markets, the opposite has happened,” said CMS Administrator Seema Verma in a statement. “While we are encouraged by this progress, we aren’t satisfied. Even with this reduction, average rates are still too high. If we are going to truly offer affordable, high quality health care, ultimately the law needs to change.”

Under President Donald Trump, the Department of Health and Human Services (HHS) has been giving states more freedom to experiment with different health care models to bring costs down.

One example of this is the reinsurance programs that some states have adopted for the individual marketplace. Reinsurance programs help insurers pay for the biggest claims or the sickest patients, helping them bring down rates for their other customers.

Alaska, the first state to adopt such a program, saw rates drop significantly after the first year it was implemented. It was rolled out in January 2017, and from 2017 to 2018, rates dropped by 25 percent for the lowest cost silver plans and 21.6 percent for the second lowest cost silver plans, according to CMS data. The year before, rates had risen 24.4 percent and 28.9 percent respectively.

Critics argue that premiums are going down because insurers are just starting to recover from having federal funding pulled from their budgets last year.

Under President Barack Obama, the federal government had been subsidizing certain low-income earners by paying a portion of their out-of-pocket expenses, called cost-sharing revenue payments. After Trump took office, the Department of Justice looked into the funding source and determined that the Obama administration had not created permanent funding for it under the ACA, and without the approval of additional funding from Congress, the cost-sharing revenue payments had to stop.

That decision was made last October, which created uncertainty for insurers, most of which were required to submit their rates for review in September.

The Congressional Budget Office and the Joint Committee on Taxation estimated that the cost of silver-level plans increased about 10 percent this year as a result of the cost-sharing revenue payments being cut, and that CSR payments would continue to effect rates for years to come.

“We heard a lot of predictions that just didn’t turn out to be true,” Verma said to reporters via phone. “So I think collectively, all the moves that we’ve made, our new regulations, the reinsurance waivers, have all come together to lower premiums.”

In August, HHS gave guidance to insurers on how to deal with the loss of funding, and has also given 30 states and the District of Columbia grants worth $8.6 million to improve the local health care markets.

On the call with reporters, Verma also touted the administration’s expansion of short-term, limited duration health insurance plans from under three months to up to three years. The administration expanded them, she explained, because they provided coverage for people whose premiums were so expensive, they might not have been able to afford insurance otherwise.

These slimmed-down insurance plans don’t help people who drop their insurance from being penalized under the individual mandate, which is still in effect for 2018, but even with the penalty, these plans could be cheaper than paying for the ACA-approved plans, which cover more but cost more. According to an eHealth study, short-term plans can be up to 80 percent cheaper than ACA-approved plans.

Senate Democrats on Oct. 10 tried to invalidate the rule expanding these short-term plans, which are meant to cover people facing a gap in insurance coverage, arguing that while they may have lower premiums, they can quickly become more expensive if someone has a serious health episode. The Democrats joint resolution to remove the rule failed, however, because only one Republican, Susan Collins of Maine, voted with the Democrats. At least two Republicans would have had to vote for it to be passed.