California Authorizes Health Insurers To File “Trump Rates” and “ACA Rates”

Commissioner Jones authorizes health insurers to file two sets of rates: “Trump Rates” and “ACA Rates”

April 28, 2017

Undermining of ACA by Trump Administration likely to cause increased rates

SACRAMENTO, Calif. — Insurance Commissioner Dave Jones announced today that he has authorized health insurers filing rates with the Department of Insurance to file two sets of rates, in light of the market instability created by President Trump’s continued undermining of the Affordable Care Act (ACA). Despite the likelihood that health insurers will have to increase rates due to Trump Administration actions, Jones encouraged health insurers to file a second set of rates premised on continued enforcement of the Affordable Care Act, in the hope that President Trump might reverse course and stop undermining the Affordable Care Act.

The actions of the Trump Administration to undermine enforcement of the ACA’s individual mandate and the failure of President Trump and Republican House leaders to ensure funding of the Cost-Sharing Reductions in the Affordable Care Act have created immense uncertainly and instability for 2018’s health insurance market.

Affordability and availability of health insurance coverage are both threatened by the actions of President Trump and Republicans in Congress. Next week health insurers will submit preliminary proposed rates for 2018 to state regulators and Covered California.

“The Trump Administration and House Republican Leaders continue to undermine the Affordable Care Act, creating instability in health insurance markets and causing health insurers to have to increase rates for the 2018 market,” said Commissioner Jones. “Given the actions by President Trump and House Republican leaders, I have taken the unprecedented step of authorizing health insurers to file more than one set of proposed rates for2018—one assuming the ACA is enforced and funded and the other assuming that President Trump and House Republican leaders continue to undermine or repeal the law and cause unnecessary premium increases.”

The California Department of Insurance receives preliminary health insurance rate filings for individual market products on May 1 of each year for the following calendar year. These proposed rates are also provided to Covered California for those products that insurers or health plans intend to sell through Covered California. Due to all the uncertainty at the federal level regarding enforcement of the individual mandate, availability of risk adjustment payments to insurers, and the status of Cost-Sharing Reduction funding, Commissioner Jones has notified health insurers in California that they may file more than one set of proposed rates for 2018.

Insurers have been encouraged to file rates assuming that the ACA is enforced and funded as well as rates they are filing that are based on all the uncertainty in the market due to undermining of the ACA by the Trump Administration and House Republican Leaders. Insurers have been asked to submit rate information about how rates will differ if the individual mandate is not enforced and if the federal funding for Cost-Sharing Reductions is not provided.

Editor’s note: The California Department of Insurance regulates very few of the health plans and their premiums that are offered through Covered California. The Department of Managed Health Care regulates most of the health plans offered through Covered California.

Insurance Commission Jones Letter To Health Insurers

April 24, 2017

Re: Rate Filings for 2018 Individual Health Insurance Coverage

To All California Health Insurers:

The deadline for the submission of preliminary rate information and policy forms for the 2018 individual health insurance market is fast approaching (May 1, 2017).

I have written President Trump asking that he and his Administration stop undermining the Affordable Care Act and health insurance markets. Health insurers are legitimately concerned that the President’s actions are undermining the ACA and health insurance markets. For example, the President’s first Executive Order directing federal agencies to “waive, defer, grant exemptions from, or delay” requirements of the Affordable Care Act created a great deal of uncertainty about what the market rules will be in 2018.ii In particular, the Trump Administration’s Internal Revenue Service has announced that it would accept tax returns which did not demonstrate compliance with the individual mandate (the Individual Shared Responsibility Requirement).iii The individual mandate is a critically necessary component of health insurance market stability. The Trump Administration’s actions to date undermining the mandate create uncertainty about who will purchase health insurance next year, and an increased likelihood that healthy persons will not purchase health insurance while only those with illnesses will — an outcome that could cause the risk pool to deteriorate and result in health insurers raising premiums on the remaining insureds.

The Trump Administration and House Leadership have also cast doubt on whether they will continue to make the Cost-Sharing Reduction payments upon which approximately half of the 1.5 million Californians who purchase health insurance through Covered California rely. President Trump suggested in a recent interview that he may stop making the Cost-Sharing Reduction payments in order to obtain political leverage. His statements and actions cause great uncertainty and doubt about the continuance of the Cost-Sharing Reduction payments in 2018. Further, unless the House Leadership resolves the issues regarding Cost-Sharing Reduction payments as a part of the budget continuing resolution this week, for 2017 coverage, and permanently for 2018 and thereafter, the continued pendency of the House v. Price litigation casts a further pall of uncertainty over the market.

These are but a few examples of actions taken by the Trump Administration and House Leadership which undermine the Affordable Care Act and health insurance markets in California and across the nation. It has been widely reported that health insurance executives met with the President on February 17th, yet received no assurances that the Administration would stop undermining the ACA.v Further, I understand that last week executives met with CMS Administrator Verma seeking information regarding the fate of funding for Cost-Sharing Reduction assistance, but also received no assurance.vi

In light of all the actions taken by the Trump Administration and House Leadership to undermine the ACA, I expect that health insurers will consider filing significant rate increases for 2018. Further, I am concerned that this needless uncertainty may, in some cases, cause insurers to leave markets entirely. I hope and urge that insurers work with me, Governor Brown’s Administration, and Covered California before insurers make decisions that would impact the affordability and/or availability of coverage in California’s individual market for 2018.

I request that California health insurers develop and submit preliminary rate information filings that reflect continued maintenance and enforcement of the ACA, including Cost-Sharing Reduction payments and enforcement of the individual mandate. If a premium load factor reflecting enforcement of the individual mandate only on an audit basis (rather than at the time the return is filed) is included, that factor should be specified in the filing. In addition, given health insurers’ legitimate concerns about Trump Administration and House Leadership actions undermining the ACA and health insurance markets, the Department will accept a separate preliminary rate information filing that anticipates discontinuation of Cost-Sharing Reduction payments, and lack of enforcement of the individual mandate. Within the Actuarial Memorandum for the latter filing, separate estimates of the additional premium loads that the products’ rate would bear if (1) Cost-Sharing Reduction payments are not funded for 2018, and (2) the individual mandate is not enforced should be included.

My continued hope is that President Trump stops undermining the ACA and instead enforces and funds it, and that the House Leadership stops efforts to pass legislation to repeal or otherwise undermine the ACA. It is with this hope that I ask insurers to file rates that would reflect the President reversing course and enforcing and funding the ACA, which is the law. However, the Department will accept a separate preliminary rate filing reflecting rates should the President not change his current course.

For questions, please feel free to contact Janice Rocco, Deputy Commissioner for Health Policy and Reform, at (916) 492-3576.

DAVE JONES

Insurance Commissioner