State officials on Thursday sharply raised health insurance rates next year for up to 80,000 individuals who buy the most popular plans on the Massachusetts Health Connector, saying President Trump’s pledge to pull critical federal payments that subsidize coverage left them no choice.
Insurance rates are slated to rise an average of 24 percent, and the announcement came less than two weeks before open enrollment begins.
Last week, Connector officials had said they planned to keep 2018 rate hikes to a “standard” level of about 8.7 percent. But hours later, the White House confirmed that it would end the subsidies, forcing state officials to immediately reconsider.
“This is going to cause disruption for a lot of folks not only in Massachusetts but throughout the country,” said Suzanne Curry, associate director for policy and government relations at the Boston consumer advocacy group Health Care For All.
The Connector’s unusual move is the latest example of the fallout in Massachusetts and other states following Trump’s decision to halt the federal payments, part of his broader effort to dismantle Barack Obama’s signature health care law. It also raises the prospect that state officials may have to change course yet again and refund money to consumers if Congress reaches a compromise to continue the subsidies.
The subsidies, called cost-sharing reductions, were expected to total $146 million for Massachusetts insurers next year. The rate hikes are expected to help insurance companies make up for that loss.
Most people in Massachusetts who benefit from federal subsidies also receive tax credits, so when their premiums rise, their tax credits also rise, shielding them from price increases. The big rate hikes are expected to hit about 80,000 middle-income state residents who obtain coverage on the Connector and who do not receive tax credits.
Insurance companies, consumer advocates, and many politicians from both parties had feared the White House’s move and warned that the loss of subsidies would cause chaos in insurance markets. Officials at the state Division of Insurance and at the Connector — which sells insurance to Massachusetts residents who don’t get coverage through an employer — have been grappling with uncertainty around the issue for months.
A bipartisan group of senators reached a deal this week to keep funding the payments, but it’s unclear whether that deal will receive support in the House of Representatives or from Trump.
The subsidies were included in the Affordable Care Act to offset deductibles and other out-of-pocket costs for lower-income Americans. Trump and some other Republicans consider the payments to be “bailouts” for insurance companies.
Connector officials had hoped to avoid a spike in health coverage next year, but the White House’s decision has forced them to set rates that account for the loss of federal subsidies, officials said.
“We find ourselves at this point in time feeling as if there’s no other choice,” said Louis Gutierrez, executive director of the Connector. Gutierrez said the agency is launching a campaign to educate members about the changes before and during open enrollment, which begins Nov. 1. They will receive several e-mails, letters, and phone calls, he said.
Individuals facing big rate increases can shop around to find a more affordable plan. The biggest rate hikes apply to midlevel “silver” plans. But individuals also can choose from “bronze” plans that tend to have higher deductibles and lower premiums, or “gold” plans that have higher premiums and lower deductibles.
They could also choose to leave the Connector entirely and buy a health plan directly from their insurance company.
Massachusetts is hardly alone in this predicament. The majority of other states have struggled with the same issues and have similarly decided to set unusually high rates. They, too, are bracing for confusion and disruption in the individual insurance markets.
The uncertainty around the future of the health care law already has led insurers to leave exchanges in some states, although no Massachusetts insurers are expected to exit because of the instability.
Most Massachusetts residents receive their health insurance through an employer and will not be affected by the rate hikes.
Governor Charlie Baker has repeatedly urged federal officials to continue paying insurance subsidies. He sent a letter to the state’s congressional delegation Thursday saying “immediate, affirmative, and bipartisan congressional action is needed in order for Massachusetts to be able to provide affordable coverage in 2018 and beyond.”
At this point, state officials and insurers are expecting the subsidies to disappear immediately — meaning the monthly payments won’t be made for the rest of 2017. Baker’s office said the state will offset that loss of federal money to insurance companies this year — expected to total $28 million — but did not explain how.
The payments go directly to insurers such as Tufts Health Plan, Neighborhood Health Plan, Boston Medical Center HealthNet Plan, and others. They’re used to discount coverage for individuals earning up to $30,150 a year, and families of four earning up to $61,500.
The Trump administration had authority over the subsidies because of a lawsuit filed by House Republicans against the Obama administration challenging the legality of the payments. A judge sided with the Republicans, but the ruling was on hold while the case was being appealed.
Two senators, Lamar Alexander of Tennessee, a Republican, and Patty Murray, of Washington, a Democrat, said this week that they had reached a deal to continue the payments and stabilize insurance markets. Baker and others hailed the compromise, but its prospects are unclear.
Massachusetts Attorney General Maura Healey has joined several other states to sue the Trump administration. The states are asking a federal judge in California to compel the administration to continue making the payments. A hearing is scheduled for Monday.
In the meantime, Lora M. Pellegrini, president of the Massachusetts Association of Health Plans, said the Connector’s decision to increase premiums was necessary. “Unfortunately,” she said, “this is the only decision that could be made today based on the news coming out of Washington and Congress’s inability to deal with the cost-sharing reductions.”