By Patrick Beale, CPA, CIC
If the “Shock and Awe” premium rate increases of 2014 weren’t bad enough, there could be even higher future premium increases if the Supreme Court decides to defund much of the existing federal subsidies provided under the Affordable Care Act.
The American Academy of Actuaries sent a letter this past Tuesday to Health and Human Services Secretary Sylvia Burwell, which urged the department to allow health insurers to raise premiums in the event King v. Burwell sides with the plaintiffs.
If that happens, the tax credits provided to residents in the 34 states relying on the Federally Facilitated Marketplace (FFM) would be disallowed and millions of Americans would most likely choose to go uninsured. The employer mandate, too, could be rendered ineffective.
As it currently stands, the penalties under the employer mandate are triggered by a full-time employee qualifying for and receiving a subsidy on an exchange (either State-run or the FFM). If subsidies end up being disallowed on the FFM, then employers (in essence) would not be penalized for failing to comply with employer mandate.
“If federal premium tax credits are no longer available to eligible enrollees in FFM states, enrollment could decline precipitously,” the actuaries’ letter warns. “Moreover, individuals with high-cost healthcare needs would be more likely to remain enrolled, while those with low-cost healthcare needs would be more likely to exit the market.”
The group is particularly concerned that health insurers are required to file their 2016 plan year premiums in May 2015—more than a month before justices are expected to reach a decision in the case. That means the industry would not be able to insulate itself from fallout resulting from such a ruling.
Actuaries suggest allowing insurers to submit two sets of contingent premium rates in May—one set reflecting pricing with tax credits still in place; another reflecting pricing if the tax credits are no longer allowed.
They are also pushing to allow insurers “more flexibility to revise and resubmit their rates” if the Court rules against subsidies being an option.
Otherwise, “insurer solvency could be threatened,” the letter concludes.