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Insurance premiums may rise next year as ACA protections are eroded

Health care navigator Nancy Le holds flyers during

Health care navigator Nancy Le holds flyers during a Community Council Affordable Care Act outreach in Dallas in October 2017.  Credit: AP/LM Otero

Insurance premiums could rise sharply in January, as measures to undercut the Affordable Care Act start to take effect.

In New York State, 14 insurance companies are asking for a weighted-average hike of 24 percent, with individual requests ranging from an actual rate cut to up to a 38.6 percent increase. The highest rate was requested by Fidelis Care, which has the highest percentage of individual enrollment in 2018, with 41 percent of enrollees with qualified health plans.

The state’s Department of Financial Services will announce approved rates in early August. According to the department, the hike requests are on average close to 12 percent higher than they would have been if the individual mandate under the ACA were still enforced.

Twelve of the 14 insurers in the state offer plans on the New York State of Health marketplace exchange. The weighted average rate hike requested for small group plans was 7.5 percent. The average is weighted based on insurers’ market share.

The federal tax legislation enacted last fall removed tax penalties for individuals who fail to purchase a health insurance policy. Under the ACA, individuals were mandated to buy insurance, and penalized for not doing so, in an attempt to motivate young and healthy people to buy insurance they may not personally use. If only sicker and older people buy — and use — insurance, premiums are driven higher.

Last year, insurers in New York State asked for a weighted average hike of 17.7 percent, which the department of financial services cut to an approved overall rate hike of 13.9 percent. Many people buying policies on the exchange qualify for subsidies and payments to help lower premiums and out-of-pocket expenses. But those whose incomes are too high to qualify for subsidies or tax credits are not insulated from the effect of rising premiums.

The Trump administration is continuing its efforts to chip away at the ACA, which Congress tried and failed to repeal last year, and recently issued a proposed regulation that would allow insurers to offer short-term health insurance polices for up to a day short of a full year. Currently, the law allows short-term plans, for just under three months, that cost less than normal plans while offering fewer benefits.

In response, Department of Financial Services Superintendent Maria T. Vullo sent a letter to insurers on June 21 saying that short-term, limited-duration health insurance plans are prohibited in New York State regardless of potential federal regulatory changes.

“The so-called limited-duration health plans envisioned by the Trump administration’s proposed rule are nothing more than an end run around the Affordable Care Act to further sabotage the existing health insurance marketplace,” said Vullo in a statement released June 21. “A 364-day health plan is not a short-term policy but is a fiction that is being fabricated to undermine the integrity of the Affordable Care Act and its important consumer protection. Such plans would entice people to buy junk insurance that provide little in the way of genuine coverage and would drive up rates by eroding membership in existing plans.”

Short-term limited-duration plans are exempt from protections afforded consumers under the Affordable Care Act, including essential health benefits, her statement said, adding that short-term plans could, for example, deny coverage for pre-existing conditions and impose annual and lifetime benefit limits.

“Despite the noise and rhetoric from President Donald Trump and his administration, the Affordable Care Act is still the law of the land,” said Vullo in a statement, adding that the state would enforce state laws and regulations requiring individual and small group accident and health insurance policies, as well as student accident and health insurance policies, to “cover the same categories of essential health benefits that currently apply through the ACA regardless of whatever actions the federal government takes to undermine the law.”

While state law offers consumer protections to insurance company policyholders, millions of New Yorkers — almost half of workers in employer-sponsored coverage — have health coverage not regulated by state law. Employers who offer self-insured health plans are not considered insurers, even if an insurance company administers the plan. Employees may believe they have private insurance through a regulated insurer because the insurer’s name is on their paperwork. But such self-insured plans are considered an employee benefit under a federal statute known as ERISA, the Employee Retirement and Income Security Act, and are exempt from state insurance regulations and essential benefit requirements.

State Sen. Kemp Hannon (R-Garden City), chairman of the State Senate Health Committee, said it was not clear what would happen with those plans should the ACA’s protections be overturned.

“The ACA put in a number of different protections for health insurance coverage,” he said. Without them, “you go back to the pre-ACA. Some companies would not have prior pre-existing conditions covered and some would.”

Many big companies used good insurance as a recruiting tool, he said, and the question is whether they would continue to. “Will the companies that want to be competitive stay being competitive?” he said. “The other ones may decide they want to economize. We don’t know.”

Hannon said he worried more about potential cuts to other health care programs, such as funding assistance for graduate medical education. “We get more than any other state.”

He added, “I would say all of this debate has introduced an unwanted element of uncertainty and that’s not something you really need to have happen.”

The state already embeds ACA requirements for state-licensed insurers to cover pre-existing conditions, charge all policyholders the same rates, and offer an array of essential benefits, according to state officials.

Assemb. Richard Gottfried (D-Manhattan), who chairs the state Assembly Health Committee, said that while the state cannot impose requirements on the large group self-insured employer plans, it could take further action in response to the loss of federal ACA protections for individuals. “There would be a lot to be said for New York State enacting its own individual mandate,” he said, if the lack of a federal mandate results in more people opting out of buying health insurance, thus driving up premium costs.

New Jersey and Washington, D.C., have recently enacted their own individual mandates to take effect in January, when the federal tax penalty for a national mandate is set to end. In Vermont, a mandate could take effect in 2020. The affordable care act was based in part on legislation in Massachusetts, where an individual mandate has been in effect since  2006. 

Gottfried said the Assembly has for the last four years passed his NY Health Act, which would abolish insurance companies and create a single-payer plan with state health insurance that he said would cost far less than the current system. He said it fell one vote short of passing the State Senate. Gov. Andrew M. Cuomo proposed further study, he said.

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