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Actuaries urge leeway to change health plan rates if subsidies killed


Health insurance actuaries are pushing the U.S. Department of Health and Human Services to allow plans to revise their rates for 2016 coverage if the U.S. Supreme Court invalidates the Patient Protection and Affordable Care Act's premium subsidies in federally run exchanges.

They warn that without leeway to adjust premiums in health plans sold in those marketplaces, the solvency of some insurers “could be threatened.”

Rate filings for 2016 federal exchange plans are due May 15. But the King v. Burwell case, which is being argued next week, likely won't be decided until June. That means insurers will be submitting final 2016 premiums as if the subsidies still exist even though those subsidies could vanish after the fact.

Many think tanks and policy experts have said without subsidies under the health care reform law, people would be unable to afford their health coverage and drop it. Insurance companies then would have to raise rates because only the sickest people would keep their plans.

Because of the predicament, the health practice council of the American Academy of Actuaries penned a letter Tuesday to HHS Secretary Sylvia Mathews Burwell asking her department to consider two options if the plaintiffs win the case.

First, the group wants HHS to allow insurers to submit two sets of rates. One set would reflect “pricing assumptions that would be appropriate” if the subsidies stand. The other would account for subsidies ending in much of the country.

The other option would allow insurers to revise submitted rates if the premium tax credits are struck down.

HHS recently told Congress it has no backup plan if the plaintiffs prevail in the King case. Cori Uccello, a senior health fellow at the American Academy of Actuaries, said the group's letter had nothing to do with that announcement, nor does it address the bigger issues of lower enrollment or higher costs. Instead, the letter is trying to raise awareness that insurers would be in an immediate bind for 2016 because their locked-in rates would not be adjustable.

“Insurers can't just automatically increase premiums to reflect the new risk pool,” said Ms. Uccello, who also is a member of the Medicare Payment Advisory Commission. “This is just trying to highlight that issue. There's a solvency risk.”

If HHS does not allow insurers to revise their 2016 premium rates, would they pull out of the marketplaces altogether? That's unclear, Ms. Uccello said. But it certainly seems feasible. “It's something that plans would have to consider,” Ms. Uccello said.

Longer term, premiums for federal exchange plans are expected to rise by 45%, and enrollment would drop by 70% if the subsidies are struck down, according to research from the RAND Corp.

Bob Herman writes for Modern Healthcare, a sister publication of Business Insurance.

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