Early Rate Filings Show Premium Increases, Rising Costs of Care

The Centers for Medicare & Medicaid Services (CMS) has published proposed rate changes for 2024 Marketplace plans. In some states, insurers submitted rate requests earlier in the summer, alongside justifications for the proposed changes to next year’s premiums. These filings reveal trends in underlying health care costs and consumer behavior, as well as illuminating past and projected effects of state and federal reforms on market dynamics. CHIR dug into the rate requests* from select states with early rate filing deadlines—the District of Columbia (DC), Maryland, Oregon, Vermont, and Washington—to see what’s behind the premiums consumers could be facing in 2024, both on- and off-Marketplace.

Most Insurers Asked to Increase Rates

The vast majority of insurers in our sample are seeking higher premiums for their individual market plans. In these five states, premium requests for plan year 2024 ranged from an average 3.4 percent decrease to an average 18.5 percent increase (see table).

Table. Average Proposed Individual Market Rate Changes in Select States (Plan Year 2024)

StateHighest average rate request (%)Lowest average rate request (%)DC18.5 (CareFirst HMO)9.9 (CareFirst PPO)Maryland8.0 (Kaiser)-2.0 (United, Optimum Choice)Oregon8.5 (Providence)3.5 (PacificSource)Vermont15.5 (Blue Cross Blue Shield of Vermont)12.8 (MVP)Washington17.9 (Kaiser Foundation Health Plan of Washington)-3.4 (Asuris)

Source: individual market rate filing summaries published by DC, Maryland, Oregon, and Washington, and author’s review of Vermont rate filings, for plan year 2024.*

Insurers justified proposed increases by citing a number of contributing factors, including rising care costs, consumer utilization patterns, profit margins, risk adjustment expectations, and unfavorable claims experience. Filings also showed interesting, if not mixed results for the impact of some state and federal policies, as well as the effects of the pandemic. Some of these themes are explored further below.

Always On-Trend

Trend—the combination of changes to health care costs and enrollee utilization patterns—continues to be a primary driver of proposed rate hikes. For example, trend accounts for nearly two-thirds of Blue Cross Blue Shield of Vermont’s proposed 15.5 percent rate increase and almost 80 percent of the 9.9 percent increase requested by CareFirst’s PPO line of business in DC. Insurers frequently attributed trend increases to the rising cost of medical services and pharmaceuticals. However, projected increases in utilization, such as higher pharmacy benefit use, still contributed to proposed rate increases.

Some filings illustrated the impact of insurer contracting practices on cost, and ultimately trend and premiums. In Washington State, Premera Blue Cross detailed how health systems that account for the vast majority of claims are asking for large increases in reimbursement—some in the double digits—and “have shown a willingness to allow our contracts to expire” if they don’t get the reimbursement levels they demand. The rate filing also states that “limited competition and regional monopolies” contributes to higher costs. Also in Washington State, Coordinated Care broke down changes in health care costs by network, indicating that the impact of unit costs on premiums is lower for the network serving enrollees in its public option-style plan offering—which is subject to state limitations on provider reimbursements—than in the insurer’s other plan network in the state.

Compared to Prior Years, COVID-19 is a Bit Player

COVID-19 continues to play a role in insurers’ rate filings, albeit a smaller one. Unlike prior years’ early rate proposals, the impact of the COVID-19 pandemic was not prominently featured in insurers’ 2024 filings. Many insurers in the reviewed filings did not mention the pandemic at all. Some filings indicated that pandemic-related uncertainties and abnormalities prompted changes to their historic experience (which informs their 2024 rate requests), but did not suggest that COVID-19 would be a cost driver next year. Insurers that predicted an impact from COVID-19 projected only a small effect on premiums, generally stemming from changes due to the expiration of the federal pandemic-related public health emergency. These insurers typically either increased rates based on expected increases in the cost of vaccines for payers, due to the removal of federal manufacturing subsidies, or decreased rates because of COVID-19 coverage policies that have expired, such as the requirement to cover testing without cost sharing. In Washington State, Molina’s filing suggested that these two dynamics would offset each other. Kaiser Foundation Health Plan of Washington described an expectation that utilization would increase in 2023 and 2024 “as the impact of COVID-19 continues to wear off.”

Some insurers did predict some lasting, secondary impacts of the pandemic. Oregon regulators specifically asked insurers about how utilization behaviors have changed with consumers switching back to in-person care as COVID-19 cases dropped. Several insurers mentioned the continued popularity of telehealth, but some noted that they have not seen preventive service use return to pre-pandemic levels.

The Impact of Medicaid Redeterminations is Unclear

April marked the end of a federal policy allowing Medicaid enrollees with changes in program eligibility to remain enrolled. States have begun the process of Medicaid redeterminations, or “unwinding” this continuous coverage policy, and millions of people have already lost their health insurance. While many people losing Medicaid will be eligible for subsidized Marketplace coverage, that transition doesn’t appear to affect proposed rates in these five states even though the transition process is expected to extend into 2024.

In Maryland and DC filings, CareFirst explicitly excluded the premium impact of the unwinding, reserving the right to change its proposal during the review process to account for the effects of Medicaid redeterminations. In Providence Health Plan’s filing in Washington State, actuaries noted that, in addition to an expectation that the insurer would not receive enrollees from this population, they lacked “any quantitative evidence that supports a change in [Providence Health Plan] premium rates would be warranted.” Community Health Plan of Washington’s filing said the unwinding’s impact on the risk pool was “immaterial” to their rate proposal.

However, some filings predict modest changes to membership or morbidity based on redeterminations. For example, in Oregon, BridgeSpan indicated that Medicaid enrollees transitioning to the Marketplace during the unwinding would be relatively sicker. On the other hand, Blue Cross Blue Shield of Vermont, which predicted an additional 1,609 new enrollees by the beginning of 2024 due to Medicaid redeterminations, suggested these new members would not impact the insurer’s risk score.

Reinsurance Remains Reassuring

Filings show that state reinsurance programs continue to hold down insurers’ premium requests. Reinsurance programs prevent high-cost claims incurred by insurers from driving up premiums by covering a portion of the claims. Several states have established reinsurance programs using a 1332 Waiver under the Affordable Care Act (ACA). In Oregon, insurers filing individual rates credited the state’s reinsurance program with holding down premiums. Providence Health Plan, for instance, reduced their claims experience by 8.6 percent thanks to Oregon’s reinsurance program.

State of Play: Insurers Predict the Impact of Washington State’s 1332 Waiver

Washington State asked insurers filing individual market rate requests to estimate the impact of the state’s new 1332 Waiver, which will expand access to Marketplace coverage to undocumented residents in 2024. Many insurers filing rates for 2024 indicated that the Waiver would not impact their estimated enrollment or collected premiums next year, but others suggested that this new pool of Marketplace enrollees would put some downward pressure on premiums. For example, both PacificSource and Kaiser Foundation Health Plan of the Northwest predicted that premiums would be lower under the Waiver compared to premiums without the Waiver. Coordinated Care indicated the Waiver would increase membership and decrease overall morbidity, resulting in lower rates than a non-Waiver scenario. On the other hand, Community Health Plan of Washington noted that, while enrollment is expected to increase somewhat under the Waiver, the insurer does not anticipate any premium impact.

Takeaway

While the pandemic and policy changes continue to keep us on our toes, some market dynamics are steadfast, like the increasing cost of American health care. As trend continues to drive premium increases, policymakers are in search of reforms to improve transparency and contain costs. Thankfully, many consumers will be largely shielded from premium increases due to expanded federal premium subsidies under the American Rescue Plan Act and Inflation Reduction Act. Still, the rate review process remains an important tool to keep premium increases in check, and protect consumers’ access to affordable, comprehensive health insurance.

*Author’s note: review of early rate filings was largely limited to the narratives in the actuarial memoranda that accompany rate filings, which explain in lay language insurers’ assumptions for the upcoming plan year based on past experience and projected changes. Review was also limited to a set of states that posted rate filings relatively early compared to other states. The findings summarized in this blog are not necessarily generalizable to the broader universe of individual rate filings for plan year 2024, nor do they reflect all of the factors underlying rate requests or differences between insurers filing individual market rates in this set of states.