How King v. Burwell could impact insurers' rate filings

In a letter, group urges HHS to take proactive measures should SCOTUS rule subsidies are illegal

In a letter to the Department of Health and Human Services Secretary (HHS) Sylvia Mathews Burwell, the American Academy of Actuaries urged the agency to take proactive steps to mitigate a Supreme Court ruling that would eliminate federal subsidies.

The group highlighted that, should the Court side with the plaintiffs in King v. Burwell, average insurance premiums would increase dramatically, with healthy enrollees dropping out of the market and more high-risk consumers entering the market.

Insurers are in an especially tight bind, for their 2015 premiums are pretty much set and their 2016 premiums must be set before the King v. Burwell ruling is expected.

Listed below are key points from the letter.

  • Congress included federal subsidies in the Affordable Care Act not only as a way to increase participation in the market but also to ensure that the risk pool included both higher-risk and lower-risk consumers. Without subsidies, enrollment would decline and premiums would skyrocket, creating adverse selection.
  • Insurers already have set their premiums for 2015. What's more, the ACA prohibits insurers from changing premium rates mid-year. If enrollment drops off later on in 2015, the already-set premiums most likely would not be enough to cover claims. The deadline for insurers to file 2016 premiums is May 15; this deadline will come before the Court reaches a ruling on the case.
  • To help insurers file their rates before the Court decision, HHS and states could allow insurers to issue two sets of contingent premium rates. One set would reflect the rates should subsidies remain; the other would reflect appropriate rates should subsidies disappear. Another option would allow insurers more flexibility to revise and resubmit their rates should the Court rule in favor of the plaintiffs.

The Supreme Court will hear King v. Burwell March 4, with a decision likely to come in early June.

For more:
- here's the letter (.pdf)

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