What insurers don't know will cost Obamacare customers, big-time, in 2018.
A large fraction of the price increases sought for Obamacare health plans will be due to uncertainty among insurers about whether the government will continue paying them billions of dollars in key subsidies, and whether the government will enforce a rule requiring most people to have health insurance, a new analysis says.
"Our modeling shows that this uncertainty, if it remains, could lead payers to submit rate increases between 28 and 40 percent" above the premiums currently charged customers, the analysis by the consulting firm Oliver Wyman said.
"And more than two-thirds of those increases will be related to uncertainty around CSR [cost-sharing reimbursement] payments and individual mandate," the firm said.
The analysis comes on the heels of a number of Obamacare insurers asking for high price hikes, or saying they will leave the individual health plan marketplaces, in part because of uncertainty over CSRs.
CSRs are funds paid by the federal government that reimburse insurers for discounts in deductibles, co-payments and other out-of-pocket health costs they give to low-income Obamacare customers.
Additionally, Oliver Wyman said, a survey conducted by the firm revealed that 43 percent of insurers plan to increase their Obamacare premiums by 20 percent or more. And 36 percent of insurers plan to hike their rates by between 10 and 20 percent.
Insurers are worried that the Trump administration or congressional Republicans will stop paying them CSRs — which are worth $7 billion this year — because of either a pending federal court case, or because both the administration and the GOP oppose Obamacare.
The insurers are obliged by current law to offer the subsidies to qualified customers, and would have to continue offering them even if they are not reimbursed by the government. President Donald Trump has mused about ending the payments, whose value next year is estimated to be $10 billion.
Oliver Wyman said that premiums next year would be between 11 percent and 20 percent higher solely because of uncertainty among insurers about whether they will continue receiving CSRs in 2018.
"If payers do not gain clarity on funding of CSR payments soon, they will have to build that cost into their premiums," Oliver Wyman said.
While 94 percent of the insurers surveyed by Oliver Wyman said they plan on remaining on Obamacare exchanges next year, 42 percent of respondents said they would likely exit those marketplaces if the CSRs are halted.
The other 58 percent of insurers said they would refile their proposed premiums for next year if the CSRs were cut off.
Insurers also fret that the Trump administration will not enforce the individual mandate, which imposes a tax penalty on people who failed to have some form of health coverage.
Oliver Wyman estimates that uncertainty among insurers about possible non-enforcement of the mandate would by itself increase premiums by 9 percent, although that uncertainty alone could prompt insures to add anywhere from zero to more than 20 percent on top of their premium requests.
The company said the cost of health care will add just 5 to 8 percent above current premiums, and that the federal health insurance tax will add a mere 3 percent.