Health insurance premiums for more than 80,000 Massachusetts residents who get their coverage on the state Health Connector could soar an average of 24 percent next year if the Trump administration makes good on a threat to halt government subsidies that help lower the price of insurance.
If the federal government keeps paying the subsidies to insurers, officials at the state agency estimated Wednesday, the rates would increase less sharply, an average of 8.7 percent.
The contrasting scenarios reflect the difficult position in which Massachusetts finds itself as uncertainty over the future of health policy in Washington threatens to cause further turmoil across health insurance markets nationwide. Depending on how the Trump administration acts, buyers of health insurance on the exchange could face significant increases at the start of next year, or possibly mid-year.
State officials are expected to finalize insurance rates in the coming days for the Connector, the state insurance exchange serving people who don’t obtain health insurance through an employer.
Government subsidies, known as cost-sharing reductions, were a key element of the Affordable Care Act, which President Trump and Republicans in Congress have tried to dismantle. Trump has slammed the payments as “bailouts” for insurance companies, and his administration has been deciding month to month whether to continue paying them.
The payments to insurers in Massachusetts are expected to total $146 million next year, including to Tufts Health Plan, Neighborhood Health Plan, Boston Medical Center HealthNet Plan, Fallon Health, and Health New England.
Insurers have been warning for months that they will have to raise prices if the government stops the subsidies, and Governor Charlie Baker and others have urged Congress to guarantee the payments and avoid a major disruption in the insurance market.
The board that governs the Health Connector grappled with the problem Wednesday.
“It’s an unbelievable shame that we’re in this position,” said Roberta Herman, a board member and executive director of the Group Insurance Commission, which provides health coverage for public employees.
Marylou Sudders, the state’s secretary of health and human services and chairwoman of the Connector’s board, said, “We have been trying to chart through these unchartable waters.”
If the lower rate increases take effect Jan. 1 but the federal government stops paying insurance subsidies, the rates could potentially be increased mid-year, causing disruption and confusion for families. But if the bigger rate hike takes effect in January and the government subsidies keep flowing, members would be paying higher rates unnecessarily. That raises the possibility that insurers would have to refund money in the future.
“We’re in a business that really tries to remove uncertainty from people’s lives . . . so it’s very difficult not knowing what our funding streams are for next year,” said Louis Gutierrez, executive director of the Connector.
Rate hikes would be felt most by individuals who buy insurance through the Connector but do not receive tax credits to help defray the costs. The new insurance rates would also apply to about 194,000 people who get tax credits. If their premiums rise, the amount they receive in tax credits would also rise, to help cover their higher costs.
The open enrollment period for buying coverage for 2018 on the Connector begins Nov. 1. Connector members facing big rate increases could choose to shop around and look for more-affordable options.
Insurance rates for individuals and small businesses need approval from the state Division of Insurance. This year, the division took the unusual step of considering two sets of rates: one if the government subsidies continue, another if they don’t.
The division said Wednesday that for health plans sold on the Connector, as well as the rest of the health insurance market for individuals and small businesses, rates would rise an average of 8 percent on Jan. 1 if the federal subsidies continue. But if the subsidies end, the rate increases would average 16.8 percent.
Lora M. Pellegrini, president of the Massachusetts Association of Health Plans, said insurers are working with the Baker administration minimize the disruption for members.
“It is going to be problematic at the end of the day if the plans aren’t reimbursed for cost-sharing reductions they are required to provide,” she said.
Baker, the Republican governor of a liberal-leaning state, has repeatedly asked Republicans in Congress to help stabilize insurance markets by continuing the subsidies. His administration has also asked federal officials for permission to create a fund that would allow the state to keep paying subsidies if the federal government stops paying them.
“It is critical for federal cost sharing reduction payments to be resolved affirmatively in order to maintain market stability and to constrain rate increases,” Baker wrote to the Massachusetts congressional delegation this week.
In Massachusetts, consumers buying plans on the Connector for 2018 will have eight insurers and 52 health plans to choose from. CeltiCare Health Plan and Minuteman Health will no longer offer coverage on the Connector.
The state, as it did last year, plans to spend more than $1 million on marketing to encourage insurance sign-ups — even though the Trump administration is cutting its advertising and outreach budget.
Priyanka Dayal McCluskey
can be reached at priyanka.mccluskey @globe.com.