The deadline for Obamacare insurers to submit rate increases for next year has already arrived in some states, which means we’re beginning to get a look at how rate increases may be shaping up for 2018. In Maryland, CareFirst Blue Cross Blue Shield, one of the largest insurers in the region, has requested a 58.8% increase in premiums for next year. The company has also requested a 35% increase in neighboring Virginia. Why the big jump? According to the company’s CEO, Obamacare appears to be in the early stages of a death spiral. From the Washington Post:
“What we’re seeing is greater sickness levels. The pool of beneficiaries is becoming sicker, in part because healthier people are not coming in at the same level we hoped,” said Chet Burrell, chief executive of CareFirst, which insures about 215,000 people through the marketplaces set up by the Affordable Care Act in all three states.
Burrell said he was worried that the market was in the early stages of a death spiral, in which sick people who need insurance stay in the pool but healthier people drop out, causing insurers to raise rates — driving even more healthy people out of the market.
“We were hoping for more stability. The factors that I have described to you today lead to instability and to a spiral, and we think we are in the beginning of that,” Burrell said.
Maryland also released rate requests from three other insurers. Those requests ranged from 18 to 37 percent, suggesting that CareFirst’s request, while higher, is not a fluke. This news comes with the usual caveat about these being rate requests. Maryland’s insurance commissioner will be reviewing the request and, no doubt, pushing insurers to accept a lower rate increase.
Last year there was an average 22% increase in premiums nationwide. At the time, Obamacare supporters said this was not part of a trend but a one-time correction caused by the end of the risk corridors program. And when Aetna CEO Mark Bertolini said in February that Obamacare was “in a death spiral” there were numerous experts arguing that wasn’t true. Now we have another insurance CEO saying the same and the first sign rates could go up sharply again. Maybe Maryland is an outlier. Maybe the national average will wind up being much lower, but it has to be a worrisome sign to supporters of the law. The fact that Iowa and parts of Tennessee might have no insurers at all should be even more worrisome.
Because of the way subsidies increase when premiums rise, Obamacare can’t truly die. The people who are getting a nearly free ride will continue to take the subsidies and pay very little for their insurance no matter what it actually costs the taxpayers. But the millions of people who aren’t getting maximum (or any) subsidies could be taking another big hit next year. And if so, that’s incentive for them to drop out and pay the penalty instead. So the death spiral can happen to some degree, just not enough to kill Obamacare completely. At worst, it can create a half dead, half alive zombie-Obamacare that’s not at all what people were promised.