In a Feb. 24 letter addressed to Secretary of Health and Human Services Sylvia Matthews Burwell, the American Academy of Actuaries described some of the issues raised by the pending King v. Burwell Supreme Court case that has the potential for eliminating Affordable Care Act (ACA) premium subsidies in states with federally facilitated marketplaces (FFMs). To help address the uncertainty created by this forthcoming ruling, we recommended that the secretary introduce flexibility into the annual rate filing process in FFM states.

To be clear, while allowing rate filing flexibility is a pragmatic step, it would not resolve or mitigate the potential massive disruption in the individual market due to what could be millions of individuals dropping coverage, and the higher average costs of those retaining coverage, among other effects of discontinuing premium subsidies.

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When suggesting the secretary consider flexibility in rate filings, one option we initially outlined was that insurers could submit two sets of rates—one that reflects continued availability of premium subsidies in FFM states, and one that assumes subsidies are struck down. While that option was viable in February, it may be too late to implement such an approach because of rate filing deadlines if it has not already been done. Alternatively, we also suggested that insurers could refile rates in FFM states after the court’s ruling, if it strikes the subsidy provision. The secretary could still allow for this approach. As actuaries, our concern was and is driven by the threat of insurer insolvency, since 2016 filings for premium rate approvals have to be filed prior to the court’s ruling, and they may not be adequate to cover claims if their assumptions about subsidies don’t square with the post-ruling reality.

Depending on the direction the court takes in the King v. Burwell decision, there could be further complications in estimating how many individuals would drop coverage and how dramatic any increase in average costs would be among those remaining insured.

For example, not knowing the timing of a possible elimination of subsidies makes it difficult for insurers to prepare rates. Subsidies could be eliminated immediately, later in 2015, or even in 2016 or later. Further complicating matters in a post-ruling scenario where subsidies are no longer available is whether there might be an accord between Congress and the administration to address the disruptions in FFM states, or when or if states might move to establish their own exchanges to allow enrollee access to premium subsidies.

Mitigating the uncertainty created by King v. Burwell from an insurer solvency perspective is why we urged Secretary Burwell to take the initial step of rate filing flexibility. Addressing the potential for broader market disruption will require different and more robust efforts on the part of policymakers at the federal and state levels, insurers, and other stakeholders. The American Academy of Actuaries is committed to doing its part to aid in that effort, should the court’s ruling necessitate remedial action.   

Murphy-Barron is vice president of Health at the American Academy of Actuaries (www.actuary.org), a D.C.-based 18,500-member professional association.