Remember, the 2017 rate hikes are REQUESTS so far, not approved.

Throughout the summers of 2015 and 2016, the news media was chock-full of apocalyptic headlines screaming about MASSIVE DOUBLE DIGIT OBAMACARE RATE HIKES!!!, suggesting that rate hikes of 20%, 30% even 50% would be not just widespread but the norm nationally.

The reality, as I repeatedly tried to get through people's heads, is that while some carriers in some states were trying to push through massive hikes on some plans, the overall picture was far less dramatic. Many were seeking increases of under 10%, while some (not many, I admit) were even reducing rates. When you averaged out the rate changes by state and then weighted them by the number of people actually enrolled in those policies, it came in at around 7-8% in 2015 and around 12-13% in 2016.

Even then, the effective rates people paid ended up going up even lower as people shopped around for a better value/better bargain; in the end, 2015 saw an average 5.6% rate hike on the ACA-compliant individual market, while it ended up being around 8% in 2016. Not fantastic, but not horrific either, and certainly lower than the 11-12% average annual increases which the indy market was seeing prior to the ACA going into effect.

For 2017, the picture is a bit different. Between the carriers mostly underestimating how expensive many of their new enrollees would be to treat, the infamous Risk Corridor Massacre debacle (and the upcoming end of the program this year anyway), the loss of the Reinsurance program at the end of this year and the normal increases in healthcare treatment which were already a problem to begin with, every expert was projecting that more substantial rate hikes would be forthcoming for 2017 even before the first rate filings were posted.

As of this writing, I've compiled the actual requested rate changes for over 20 states, representing over 60% of the total population, and the hard truth is that yes, this year the carriers are indeed asking for significant increases pretty much across the board. Out of 22 states (including DC), only 5 are averaging under 10% (CA, DC, RI, VT and, surprisingly, WY) so far. The overall, weighted average across all 22 is 19.4%; once the remaining states are plugged in, I could see the requested average settling in at anywhere from 18 - 23% nationally. The ugliest number I've seen so far (of carriers with a significant number of enrollees) is Blue Cross Blue Shield of Texas, which is asking for a whopping 58.4% average rate hike on more than 600,000 current enrollees. Ouch. In other words, the reality is FINALLY starting to match the negative rhetoric on the rate hike front.

HOWEVER, there are still two major stages left which could potentially cut these numbers down to size. The second is the actual open enrollment period itself, when the enrollees actually shop around and choose their policies. There's no way of knowing what impact this will have until the dust settles next year, of course (probably in early April).

The first major stage, however, will be the actual regulatory review and approval process, either by state or federal regulators. In some states the regulators have the authority to actually change the rates; in others they can simply publish their response and try to shame carriers into lowering their rates via public pressure. In a handful of cases, they may even require/ask the carriers to increase their rates more than they had intended, although this will hopefully be kept to a minimum.

Of course, none of this means that regulators will reduce rates for any particular policy; in many cases they'll likely approve them as is. However, the Louisiana Dept. of Insurance has already demonstrated (on a very small scale) just how significant these changes could potentially be.

For some reason, they've already issued an implemented (approved) rate for one of the small group filings from Vantage Health Plan, Inc. It only impacts about 500 people, but the point is made:

Vantage Health Plan, Inc. ( Making Healthcare Work, Vantage Health Plan, VHP & LOGO )

• SERFF Tracking # VHPL-130457136

Filing Information

• Status:Closed
• Product Name:SG Transitional Plans 2016 Rate Filing
• Classification:
• Includes Exchange Plan(s):No

Overall Rate Impact

• Requested Overall Rate Impact:13.07 %
• Implemented Rate:8.58 %
• Market:Small Group
• Effective Date:
• Affected Policy Holders:496
• Affected Covered Lives:496

Brief Description:

The primary causes of the proposed change in rates for Vantage Health Plan’s CY2016 small group transitional policies are as follows:

• Medical inflation due to provider contracts
• Changes in administrative costs due to changes in Affordable Care Act (ACA) fees in 2016.
• Increases in the cost of benefits after member cost sharing due to leveraging (i.e. deductibles and copayments remain fixed while total charges increase).
• Updated claims experience, including changes in the characteristics of groups underlying the experience.

Actuarial Disposition:

• The original requested increase was 13.07% but was reduced to 8.58% during the review. While we didn’t necessarily have any problems with the initial requested increase amount, we did request additional support for some of their filing assumptions considering it exceeded the 10% threshold requiring a detailed rate review and HIOS report from us. Vantage staff contacted us to see if we would allow the Company a chance to reduce the contribution to surplus from 5% of premium to 1% of premium which translated to a reduction in rates of approximately 4%. The revised rate increase request no longer triggered the requirement for an effective rate review. We did however check the filing and revised documentation for compliance. Vantage provided a revised actuarial memorandum and Part I justification documenting the revised rates. These documents reasonably support the proposed rates. A post submission update has been submitted in SERFF reflecting the revised rate information, but has not yet been approved. Once the past submission update has been approved the filing is ready to be closed in our opinion.

If I'm reading this correctly, it sounds like Vantage didn't want a full/thorough review, so they voluntarily knocked their request down below the 10% threshold on their own. That's a 4.5 percentage point reduction before the regulators even had to get their hands dirty.

I've no doubt this particular example won't happen that often, but it at least proves that there's likely a lot of wiggle room for negotiation baked into many of these double-digit rate hike requests. Stay tuned.