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South Dakota health insurance marketplace: history and news of the state’s exchange

Average approved rate increases for 2019: 2.5% for Avera and 9.7% for Sanford

Highlights and updates

South Dakota exchange overview

State legislative efforts to preserve or strengthen provisions of the Affordable Care Act

South Dakota is among the states that have done the least to preserve the Affordable Care Act’s gains.

South Dakota uses the federally run exchange, so residents enroll through HealthCare.gov. Open enrollment for 2019 coverage ended on December 15, 2018 (residents with qualifying events can enroll outside of open enrollment).

Open enrollment for 2020 coverage will begin November 1, 2019, and will continue until December 15, 2019. All plans selected during open enrollment will take effect on January 1, 2020.

South Dakota has two carriers — Avera and Sanford — offering plans in the exchange for 2019. And they are also the only carriers offering plans in South Dakota’s individual market (including off-exchange) in 2019, as two other carriers that previously offered plans outside the exchange opted to leave the state’s individual market at the end of 2016.

HHS estimates that 19,000 South Dakota residents gained health insurance coverage from 2010 to 2015, as a result of the ACA. That number has continued to grow, as exchange enrollment in South Dakota stood at only 21,393 at the end of the 2015 open enrollment period, and had reached 29,652 by 2018. It fell slightly in 2019, with 29,069 people signing up during open enrollment. But the drop in enrollment was not as significant as it was in many other states that use HealthCare.gov.

Western South Dakota Community Action Partnership serves as a navigator organization in the state, and received a $100,000 navigator grant in 2018. Navigator grants are much smaller than they were in previous years, as the Trump Administration has reduced funding by about 84 percent. But navigator funding is expected to remain level in 2020 and 2021.

Two insurers offer coverage for 2019; average rate increases about 5%

Insurers that wish to offer individual health insurance in South Dakota in 2019 had to file proposed rates with the South Dakota Division of Insurance by June 1, 2018. But the Division of Insurance doesn’t publicize information about the filings until regulators have finalized the rates (the federal government publishes proposed rates on ratereview.healthcare.gov as of August 1 each year).

Unlike some states, regulators in South Dakota do have the authority to reject rate filings that aren’t justified, or to require insurers to make adjustments to proposed rates. The Division of Insurance reviewed the rates over the summer to determine if they were actuarially justified, and requested additional information from the insurers where necessary.

The approved rate increases for South Dakota were:

  • Avera: 2.5 percent average rate increase (approved filing available here: AVER-131514691) Avera has 18,403 members in 2018
  • Sanford: 9.7 percent average rate increase (approved filing available here: SANF-131510012) Sanford has 10,777 members in 2018.

The weighted average rate increase in South Dakota’s individual market is a little more than 5 percent for 2019. That’s before any premium subsidies are applied, however. Ninety-three percent of the people who had coverage through South Dakota’s exchange in 2018 were receiving premium subsidies that paid an average of 85 percent of their total premium.

Subsidies will continue to offset the majority of premiums for the majority of enrollees in 2019, although it’s always important to compare all of the available options during open enrollment, as the plan that represented the best value in one year won’t necessarily provide the best value in the following year. The average benchmark premium in South Dakota (second-lowest-cost silver plan), upon which premium subsidies are based, is increasing by 6.5 percent for 2019, so subsidies will grow commensurately.

Enrollment reached a record high in 2018 but dropped slightly in 2019

Enrollment in South Dakota’s exchange started out quite low in 2014, with just over 13,000 people enrolling. That was only an estimated 11.1 percent of South Dakota’s subsidy-eligible residents enrolled in coverage through the exchange – tying Iowa for the lowest percentage in the nation.

The fact that Wellmark did not participate in the exchange was cited as one of the reasons for the low enrollment in South Dakota’s exchange in 2014. The carrier’s huge market share and name recognition coupled with the fact that existing Wellmark members had no means of keeping their carrier and also obtaining subsidies, meant that enrollment lagged behind the rest of the country in South Dakota.

Enrollment grew to 21,393 people in 2015, and grew again, to 25,999 people, in 2016. South Dakota’s percentage increase in exchange enrollments in 2016 was the ninth highest in the US, and the fourth highest of the states that use Healthcare.gov. This could be due in part to the sharp rate increases for Wellmark’s off-exchange plans in 2016, which may have encouraged former Wellmark members to shop on the exchange instead.

Across all the states that use HealthCare.gov, the general trend thus far has been peak enrollment in 2016, with slight declines for 2017 and again for 2018. But South Dakota is among just a handful of states where enrollment climbed steadily over each of the first five years of exchange operation.

During the open enrollment period for 2017 coverage, 29,622 people purchased plans in the South Dakota exchange. The increase in South Dakota’s exchange enrollment in 2017 was likely due in large part to the fact that Wellmark and DakotaCare both terminated their off-exchange plans in South Dakota at the end of 2016, and their enrollees had to seek coverage from Avera or Sanford instead, both of which offer plans on and off the exchange. There were 10 HealthCare.gov states that saw enrollment growth in 2017, and South Dakota’s percentage increase in total enrollment was the second-highest.

And enrollment grew again in 2018, although only slightly, with 29,652 people signing up. But it dropped for the first time in 2019, when 29,069 people signed up for private plans through South Dakota’s exchange.

But across all states that use HealthCare.gov, there was an average enrollment decline of 3.8 percent in 2019, so South Dakota’s enrollment drop was less significant than average. And it came on the heels of enrollment increases in 2017 and 2018, despite the fact that average enrollment in states that use HealthCare.gov had declined in both of those years.

Average rate changes for 2018 jump after Trump cuts off CSR funding

Both of the insurers that offered coverage in the South Dakota exchange in 2017 are continuing to offer plans for 2018. Regulators approved rates in September 2017 that were a little lower than the insurers and proposed. Those rates were based on the assumption that CSR funding would continue in 2018. However, when the Trump Administration announced in October 2017 that CSR funding would end immediately, South Dakota was one of the states that worked with CSM to allow insurers to use an emergency refiling process to submit new rates, with the cost of CSR added to premiums.

Here are the average 2018 rate increases — before accounting for premium subsidies — for South Dakota exchange enrollees:

  • Avera: Initially proposed average rate increase of 20 percent; regulators approved average rate increase of 17 percent in September, but insurers were allowed to refile rates after Trump cut off CSR funding, and the final approved average rate increase was 29 percent (27,000 members).
  • Sanford: Initially proposed average rate increase of 11 to 14 percent; regulators approved average rate increase of 7.5 percent in September, but insurers were allowed to refile rates after Trump cut off CSR funding, and the final approved average rate increase was 15.9 percent (8,270 members)

Initially, the proposed rates were based on the assumption that the federal government would continue to fund cost-sharing reductions (CSRs). Both insurers indicated that if CSR funding were to be eliminated (which ended up being the case), the rates would have to rise even more to compensate for the cost of providing CSRs to eligible enrollees. And in the days after CSR funding was eliminated, both of South Dakota’s insurers were allowed to refile for 2018, with the cost of CSR added to premiums.

In April 2017, a Kaiser Family Foundation analysis estimated that premiums for silver plans would have to rise by 16 percent in South Dakota (in addition to the rate increase that would otherwise apply) if CSRs weren’t funded.

The rate filings for South Dakota plans are available via SERFF. Avera’s revised filing (AVER-131179213) notes that “To keep the Silver rates lower than those for Gold plans, despite the additional load for the non-funding of CSR payments, Avera adjusted the profit and risk load.” They kept the profit and risk load the same as initially proposed for Gold, Bronze, Catastrophic, and off-exchange Silver plans. But they cut it almost in half for on-exchange silver plans. This is interesting, as it’s different from the approaches that insurers in most other states took. Insurers in most states simply added the cost of CSR to silver plans, and let the chips fall where they would. The result is that Gold plans in some areas of the country are cheaper than Silver plans, and Bronze (and sometimes Gold) plans are often free for enrollees who receive premium subsidies. But Avera’s approach helped to ensure that pricing would still “make sense” for their 2018 products, in terms of having the plans follow a least expensive to most expensive path as they move up from Bronze to Gold.

Sanford’s filing (SANF-131180312) that was based on a lack of federal funding for CSR was initially filed in early September. But the insurer notes that the filing was withdrawn once they decided to finalize their alternate rate proposal that was based on the assumption that CSR funding would continue in 2018. Sanford had to reverse course and switch to the higher rates (with the cost of CSR added to silver plan premiums) in October, after CSR funding was eliminated.

People who receive premium subsidies were largely insulated from the rising premiums, as the premium subsidies grow each year to keep pace with the cost of coverage. The subsidy amounts are based on keeping the after-subsidy cost of the second-lowest-cost silver plan (benchmark plan) at an affordable level — but the subsidies can be applied to any metal-level plan). And the IRS reduced the percentage of income that people have to pay for the benchmark plan in 2018, which means that net premiums are actually slightly lower in 2018 than they were in 2017 (note that some enrollees may have had to switch plans to see a decrease in net premiums, as the benchmark plan can change from one year to the next).

91 percent of South Dakota exchange enrollees were receiving premium subsidies in 2017. But the other 9 percent — as well as everyone who buys coverage outside the exchange — had to shoulder the full impact of the rate increases for 2018. However, since the cost of CSR was added only to silver plans, people who don’t get premium subsidies (and who thus are generally also ineligible for CSR benefits, as those have lower income limits for eligibility) were able to pick non-Silver plans for 2018 and avoid at least the portion of the average rate increase that was added to cover the cost of CSR.

Rates and carriers for 2017

Avera and Sanford offered plans on and off the exchange in South Dakota in 2016, and continued to do so in 2017. Their average rate increases for 2017 were:

Both Sanford and Avera had double-digit rate hike percentages for 2016, but they were much smaller than the average rate increases for 2017.

As of March 2016, effectuated enrollment in the South Dakota exchange stood at 24,578. Sanford confirmed that their total on-exchange enrollment in South Dakota as of August 2016 was 6,589. Avera’s rate filing indicated that their total enrollment (on and off-exchange) was about 21,000.

Since both carriers implemented very similar—and quite significant—rate increases, premium subsidies also grew sharply in South Dakota for 2017. HHS reported that the average benchmark plan (the second-lowest-cost silver plan in each area) premium would increase by 39 percent in South Dakota. Subsidies are tied to the cost of the benchmark plan, so they also had to increase to keep up with the higher prices in 2017.

Open enrollment for 2017 coverage ended on January 31, 2017. Coverage is now only available for purchase (on or off-exchange) by people who have a qualifying event. But Native Americans can enroll year-round without a qualifying event, and anyone eligible for Medicaid or CHIP can also enroll at any time.

Looking ahead to 2018: South Dakota exchange and the Trump Administration

Insurers that wish to offer coverage in South Dakota’s individual market in 2018 — on or off-exchange — must file rates with the South Dakota Division of Insurance by June 1, 2017. South Dakota does not conduct public rate hearings, and none of the rate filing data will be made public until the Division of Insurance has finalized the rates.

But in every state, there is significant uncertainty surrounding the individual insurance market under the Trump Administration and a Republican-controlled Congress. Sanford’s Executive Vice President, Kirk Zimmer, assuaged South Dakotans’ immediate fears in January, reassuring them that nothing would happen to their coverage in 2017, regardless of what’s in store for 2018 and beyond (Sanford is also building a new clinic in Sioux Falls, which will open in 2018). But there are plenty of questions in terms of what comes next, and regarding ongoing funding for the ACA’s cost-sharing subsidies.

House Republicans passed the American Health Care Act in May 2017, although it faces a very uncertain future in the Senate. The House version of the legislation would alter premium tax credits (making them smaller overall, and significantly smaller for older enrollees and people in areas where health insurance is more expensive than average), and would cut federal Medicaid funding by switching to block grants or per-capita allotments, in place of the current open-ended federal match. It would also allow states to seek waivers from some ACA requirements, including the essential health benefit rules and the requirement that all individual market plans be community-rated, regardless of applicants’ medical history or continuous coverage.

South Dakota hasn’t expanded Medicaid under the ACA, so the state has not taken full advantage of the ACA’s provisions and would thus not feel the impact of repeal as strongly as states that are fully utilizing the federal funding that was made available by the ACA. There are currently an estimated 14,000 people in the coverage gap in South Dakota. Most are currently uninsured, and their situation is unlikely to be significantly improved under the GOP’s health care reform legislation. But the people who do currently have Medicaid in South Dakota (ie, those who were already eligible for coverage under the rules that have remained in place since before the ACA was enacted) could face eligibility cuts and benefit reductions if GOP proposals to reform Medicaid — block grants or per-capita allotments — are enacted.

Off-exchange carriers exited for 2017

Wellmark and DakotaCare both offered plans only outside the exchange in 2016. But neither carrier is offering ACA-compliant plans in South Dakota in 2017.

Wellmark dropped all of their ACA-compliant plans in South Dakota at the end of 2016 (all of which were off-exchange, covering about 8,000 people). And DakotaCare’s website confirms that they do not have any ACA-compliant individual market plans available in 2017

DakotaCare transitioned to off-exchange; full exit a year later

DakotaCare offered coverage in the South Dakota exchange in 2014 and 2015, but stopped participating at the end of 2015. About 7,200 DakotaCare enrollees who had coverage through the exchange in 2015 needed to select a new plan from Avera or Sanford if they wished to continue to have coverage—and subsidies—through the exchange in 2016.

As of December 2, 2015, about half of DakotaCare’s exchange enrollees had secured coverage for 2016 through one of the other carriers in the exchange. People who had coverage through DakotaCare in the exchange in 2015 were eligible to have their coverage automatically renewed off-exchange for 2016, but no subsidies are available outside the exchange.

As long as enrollees selected a new plan by December 17, 2015, their coverage in the exchange was uninterrupted. And DakotaCare enrollees had until December 31 to cancel their coverage and avoid a significantly higher premium bill for January. But those who opted to keep their coverage and transition outside the exchange were hit with not only the loss of subsidies (if applicable), but also the 60 to 68 percent premium increases that DakotaCare imposed for 2016.

For 2017, DakotaCare is no longer offering ACA-compliant individual market plans at all, including outside the exchange.

carriers and plans for 2016

In a change from 2015, only two carriers chose to offer plans in South Dakota’s exchange for 2016, as DakotaCare switched to only offering plans outside the exchange in 2016 (they offered both on and off-exchange plans in 2014 and 2015). Of the two remaining exchange carriers, both had double-digit rate increases for 2016, in the range of 13 to 15 percent:

  • Avera: proposed a 13.69 percent rate increase (13 percent when weighted based on 2015 enrollment, but the 13.69 percent increase was based on projected 2016 enrollment). Ultimately, the rate increase was 13.98 percent (regulators approved a 13.4 percent rate increase, which climbed to 13.98 percent when based on projected 2016 enrollment).
  • Sanford: proposed a 13.2 percent rate increase, and in their initial filing, noted that it would impact 3,181 members – all on-exchange. Regulators approved an average rate increase of 15 percent for Sanford’s HMO plans (all of their plans are HMOs), and noted that total membership was 2,750 in 2015.

It’s important to remember that the average premium in South Dakota decreased in 2015, and the rate hikes for 2016 had to be viewed with that in mind.

Off-exchange

In addition to Sanford and Avera, three carriers offered plans outside the exchange for 2016 (the same open enrollment period of November 1 to January 31 applied off-exchange):

  • DakotaCare (SD State Medical Holding Co. Inc.) initially proposed an average rate increase of 18 percent for 2016, but later refiled new, higher rates with an average rate increase of 63.2 percent. They ended up with average rate hikes that range from 60 percent to nearly 68 percent. DakotaCare had 7,500 off-exchange enrollments in 2015, and about 7,000 on-exchange enrollments. The off-exchange plans were eligible for renewal for 2016. For 2017, DakotaCare has proposed average rate increases that vary from 24.6 percent to 28.8 percent. The vast majority of their previous enrollees switched to other carriers for 2016, as they only had 522 members as of June 2016.
  • Wellmark: average rate increase of 43 percent for 2016 (roughly the same as they filed; total ACA-compliant off-exchange enrollment was about 15,200 people in 2015). For 2017, Wellmark has filed an average rate increase of 30.3 percent. Their membership count was down to about 8,200 people as of early 2016.
  • Celtic also offers off-exchange plans in South Dakota, but their market share was very small in 2015. Their average rate increase for 2016 is 9.8 percent.

In November 2015, Avera acquired DakotaCare, making the carrier the second-largest in the state, insuring almost 200,000 people (Wellmark remains the largest insurer in South Dakota, with 375,000 insureds).

Wellmark has never participated in the South Dakota exchange. Their membership dropped by nearly half in 2016, following their significant rate increase and the fact that no subsidies are available to offset the cost of Wellmark plans.

Celtic did not file rates for 2017 in South Dakota, but Wellmark and DakotaCare both did. However, both carriers ultimately opted to exit the ACA-compliant market in South Dakota at the end of 2016, and are not offering coverage for 2017. The South Dakota Division of Insurance has confirmed that Sanford and Avera are the only carriers offering individual market coverage in the state for 2017, on or off-exchange.

Lower rates for 2015

In 2015, three insurers offered policies through the marketplace in South Dakota: Avera Health Plans, Sanford Health Plan, and DakotaCare. The three companies offered a total of 38 options for individuals and families.

Although there were no new carriers in the South Dakota exchange in 2015, the three existing carriers offered a variety of plans, including some new HSA-qualified options from Avera and an Avera plan that gives insureds lower out-of-pocket costs if they use an Avera provider.

The South Dakota Division of Insurance announced in their fall 2014 newsletter that 2015 rates were available on their website. The page includes links to all of the participating medical and dental carriers, as well as a searchable rates page and summaries that show minimum, maximum, and average rates based on age and location within the state.

According to a report released by the U.S. Department of Health and Human Services (HHS), the average cost for a bronze plan —the lowest-cost option — in South Dakota was $298 a month in 2014. The national average for a bronze policy was $249 a month in 2014. The lack of competition is one of the main reasons South Dakota’s premiums are higher than the nation average.

But the news was much better for 2015.  A Commonwealth Fund analysis of average premiums across all metal levels for a 40 year-old non-smoker found an average premium decrease of 21 percent in South Dakota from 2014 to 2015.  And an interactive map from the NY Times Upshot shows that in most areas of the state, people who switched from the 2014 benchmark (second lowest-cost silver) plan to the new benchmark plan for 2015 were able to obtain premium decreases.

When we include both on and off-exchange plans and look at the entire individual market in South Dakota, the average premium increase for 2015 was 2 percent, as calculated by PricewaterhouseCooper LLC.e This was still dramatically lower than the nationwide historical trend for the individual market.

Insurance ballot initiative made headlines

South Dakota was in the national news in the fall of 2014 because of a ballot initiative pertaining to health insurance networks that voters overwhelmingly approved in November. Amendment 17 was billed by supporters as “freedom to choose your doctor” but critics pointed out that it’s not as simple as proponents made it seem. Doctors and small or specialty hospitals were generally in favor of Amendment 17, while large insurers (including Sanford and Avera) and hospital networks were opposed. Ultimately, the measure passed 62 percent to 28 percent.

This does not mean that patients can choose any doctor they want though. Rather, it means that any doctor who is willing and able to comply with the terms and conditions of the health insurance carrier could enter the carrier’s network.

Because narrower networks have become commonplace over the last year, policy experts in other states were closely watching the outcome of the SD ballot initiative. A total of 27 states have “any willing provider” laws on their books, although only about half of them are as broad as South Dakota’s.

In the 2016 legislative session, a bill (HB1067) was introduced in an effort to roll back some of the provisions in Amendment 17, allowing carriers the option to offer both closed-network and open-network plans (plans with closed networks would be less expensive). The bill didn’t advance out of committee, and this article is a good summary of the controversy surrounding HB1067.

Wellmark avoids SD exchange, market share still high

Wellmark Blue Cross Blue Shield had 73 percent of the market share in South Dakota prior to the 2014 open enrollment period, but the insurance giant opted to stay out of the exchange in 2014, in 2015in 2016, and again in 2017 (they will join the exchange in Iowa for 2017, but are exiting South Dakota’s ACA-compliant market altogether, and will not offer even off-exchange plans in the state in 2017).  People who wished to purchase coverage from the state’s largest insurer through 2016 had to do so off-exchange, without the ACA’s subsidies.

Despite that caveat, Wellmark said it sold more policies outside the exchange in South Dakota in 2014 than the two on-exchange carriers combined (new policies sold outside the exchange are still fully compliant with the ACA).

No Medicaid expansion yet

South Dakota has not expanded Medicaid under the ACA, although the Governor’s support of expansion has made South Dakota a heavily-watched state in the push to expand Medicaid nationwide. As of late October 2014, 45 percent of surveyed South Dakota residents said they favored Medicaid expansion, while just 37 percent opposed it.

In December 2015, Governor Dennis Daugaard unveiled his proposal to expand Medicaid without needing to use additional state funds. The plan would utilize savings on a program that the state currently has to cover a portion of the cost of care for Native Americans provided at non-IHS facilities; Native Americans who are eligible for expanded Medicaid would be covered under Medicaid instead, and the savings on that program would more than offset the state’s portion of Medicaid expansion costs.

By January 19, Daugaard reported that the state was making progress in terms of getting federal approval for the Medicaid expansion proposal.

Daugaard had previously twice submitted a proposal to HHS for a waiver that would allow the state to expand Medicaid to people with incomes up to 100% of poverty level, instead of 138% of poverty level. HHS rejected Daugaard’s proposals though, saying that expansion must extend to people with incomes between 100% and 138% of poverty level in order to be approved.

As of mid-January 2015, Daugaard was still holding firm with his position, pushing for Medicaid expansion just for people with incomes below 100 percent of the poverty level. But he softened his stance in September 2015, and began calling for lawmakers in the state to consider full Medicaid expansion under the ACA.

By the end of February 2016, however, Daugaard had said that Medicaid expansion would not be addressed during the 2016 legislative session. He noted that there was still the possibility of a special legislative session later in the year, or the issue might be revisited during the 2017 legislative session. Hopes were high for a special session as late as mid-June 2016, but by June 22, Daugaard had confirmed that there would be no special session in 2016 to address Medicaid expansion, and that the issue would be pushed out past the 2016 election, into 2017 at the earliest.

Because the state has not accepted federal funds to expand Medicaid, 14,000 South Dakota residents fall into the coverage gap – they earn too much money to qualify for Medicaid, but too little to qualify for subsidies in the exchange. If the state expands Medicaid, they will be eligible for coverage – without premiums – under Medicaid.

The lack of Medicaid expansion disproportionately affects the Native American population in South Dakota.  Officials estimate that there are 14,000 Native Americans who would gain access to Medicaid if the state were to expand the program.  This includes people who earn between 100 percent and 138 percent of poverty and are currently eligible for subsidies in the exchange.  Many of them have not opted for private exchange plans though, for a variety of economic and cultural reasons.

Grandmothered plans can renew

On November 26, 2013 the state announced that it would allow carriers to extend existing policies per President Obama’s suggestion that non-compliant plans be allowed to remain in effect for one more year.  Sanford, Wellmark and DakotaCare all opted to allow existing policies to be renewed into 2014, giving insureds another option to compare with the new ACA-compliant plans.

The state also accepted the HHS proposal to allow those plans to renew again as late as October 2017, and continue in force until as late as December 31, 2017 (carriers can implement plan years that are shorter than 12 months in order to make sure all grandmothered plans terminate by the end of 2017).

Exchange history and outreach

Gov. Daugaard announced in late September 2012 that HHS would be running the state’s exchange, citing the high cost — estimated at $6.3 to $7.7 million — for ongoing operation of the exchange.

The state is not playing any role in promoting the new health insurance options or educating consumers about the marketplace. That decision leaves outreach efforts to the insurers and federally funded “navigators.” Navigators are affiliated with established community outreach and advocacy groups, and they are trained to help consumers understand and use the new online marketplace.

South Dakota health insurance exchange links

HealthCare.gov
800-318-2596

State Exchange Profile: South Dakota
The Henry J. Kaiser Family Foundation overview of South Dakota’s progress toward creating a state health insurance exchange.

Health Reform.sd.gov


Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org. Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.