ACA 2027 Rate Filings: Pricing Actuaries Face a GLP-1 Credibility Problem

From tracking ACA rate filings across multiple cycles, the pharmacy trend component has historically been one of the more stable inputs to the index rate development. Medical trend varied by carrier, risk adjustment created winners and losers, and morbidity assumptions diverged after COVID. But the pharmacy trend was largely a known quantity: formulary composition shifted gradually, rebate structures evolved predictably, and the specialty pipeline was visible quarters in advance. GLP-1 medications broke that pattern. The combination of explosive utilization growth, wide variance in net cost after rebates, state coverage mandates hitting mid-cycle, and genuine uncertainty about whether current growth rates represent a structural plateau or an inflection point creates a credibility problem that sits at the center of 2027 rate development.

The Filing Window and Why It Matters Now

The CMS 2027 Notice of Benefit and Payment Parameters proposed rule, published February 11, 2026, sets the regulatory framework for plan year 2027 rate development. State rate filing deadlines for 2027 plans land between May and July 2026, depending on jurisdiction. Carriers must submit actuarial memoranda with their index rate development, trend assumptions, and any special factors or adjustments applied to the pharmacy component.

For the 2026 plan year, benchmark premiums increased 21.7%, the largest single-year increase since 2018. Multiple factors contributed: the expiration of enhanced premium tax credits, enrollment composition shifts (Bronze plan selection up 10 percentage points, Silver down 14), and medical/pharmacy trend. Within pharmacy trend, several insurers explicitly identified GLP-1 utilization growth as a material cost driver, with one carrier reporting that total allowed costs for GLP-1 drugs across their commercial population rose approximately 25-30% per quarter throughout 2024, nearly doubling annual spend year-over-year.

For 2027 filings, the question is more pointed. Carriers that loaded for GLP-1 growth in their 2026 rates now have one year of experience under that assumption. Did actual GLP-1 utilization match the projected trend? Did it exceed it? Did PBM renegotiation or formulary management moderate the per-unit cost? The answers vary by carrier, and that variance is the credibility problem.

The Data Problem: What Carriers Actually Have

Most ACA individual and small-group carriers have, at best, experience from plan years 2024 and 2025 that reflects meaningful GLP-1 utilization in their specific book. Prior to 2024, GLP-1 prescriptions for obesity (as distinct from diabetes) were a negligible portion of ACA plan pharmacy spend because most plans did not cover them, and those that did imposed prior authorization barriers that limited uptake.

IQVIA data shows that commercial GLP-1 prescription volume grew from 680,000 monthly prescriptions in January 2020 to 4.7 million by May 2025. New-to-brand GLP-1 prescriptions surged more than 700% over four years. The share of large employers offering obesity drug coverage jumped from approximately 25% in 2023 to roughly 50% in 2026. In the first quarter of 2025, 29% of commercially insured patients initiated diabetes treatment with a GLP-1 as first-line therapy, up from a negligible share five years earlier.

But these are industry-wide figures. A specific ACA carrier in a specific state has a much thinner data set. A mid-size carrier with 80,000 individual-market lives might have 3,000 to 6,000 members on a GLP-1 prescription (assuming 4-8% prevalence), generating 12 to 18 months of paid claims data at meaningful scale. That is not enough to establish a stable trend rate with conventional credibility standards.

Net Cost Variance: The 2x Problem

The net plan cost of GLP-1 medications after manufacturer rebates and PBM-negotiated pricing varies enormously across carriers. List prices for Ozempic, Wegovy, Mounjaro, and Zepbound range from roughly $900 to $1,400 per month. After rebates, the net plan cost lands between $400 and $700 per member per month, translating to approximately $4,800 to $8,400 per patient per year.

That is a greater-than-2x variance in per-patient-per-year cost driven entirely by the PBM contract terms, formulary tier placement, and rebate negotiation leverage that vary from carrier to carrier. A carrier with aggressive PBM terms and exclusive formulary positioning might face $5,000 per patient annually; a carrier with a less favorable contract structure might face $10,000 or more.

For the pricing actuary developing a GLP-1 PMPM load, this variance is fatal to any attempt at pooled benchmarking. If prevalence is 5% and net cost per user ranges from $5,000 to $10,000, the implied PMPM ranges from $20.83 to $41.67. At a 10% participation rate (where growth is heading in some markets), the range widens to $41.67 to $83.33 PMPM. These are not refinements at the margin; they represent the difference between a 3% and 6% pharmacy trend contribution from a single drug class.

Applying ASOP No. 25 to GLP-1 Trend: The Credibility Framework

ASOP No. 25 (Credibility Procedures) governs how actuaries assign weight to subject experience versus external benchmarks when data is limited. The standard credibility formula assigns weight Z to the carrier's own experience and (1-Z) to a complement of credibility (typically a manual rate or industry benchmark):

Estimate = Z × Own Experience + (1 - Z) × Complement of Credibility

For the GLP-1 pharmacy component specifically, the credibility problem has three dimensions:

Limited exposure periods. Full credibility for a pharmacy trend component typically requires at least 3 to 5 complete exposure years with stable utilization patterns. Most carriers have fewer than 2 years of GLP-1 data at meaningful penetration. Using classical credibility theory with a full credibility standard of 1,082 claims (for a 90/10 criterion), a carrier with 3,000 GLP-1 users generating one claim per month has approximately 36,000 annual claim transactions. That passes the frequency threshold. But trend credibility is different from level credibility: establishing that a 25-30% quarterly growth rate is representative of the future requires observing whether the rate is decelerating, accelerating, or stable over multiple periods. Two years of observations is insufficient to distinguish a linear growth curve from an S-curve approaching saturation.

No standard complement of credibility exists. When a carrier's own data lacks full credibility, ASOP No. 25 requires selection of a complement. For most pharmacy trend components, industry benchmarks from Milliman, Optum, or Wakely serve this function. For GLP-1 specifically, these three consulting firms produce materially different projections. Milliman projects overall gross cost increases of 21% to 40% annually for obesity GLP-1 drugs in commercial plans from 2024 to 2026, with the range itself reflecting the uncertainty. Optum's internal benchmarks, built from UnitedHealth's claims data, reflect a different population mix and PBM structure than what an independent ACA carrier would experience. Wakely's projections incorporate enrollment attrition assumptions that may not apply to a growing carrier. The complement of credibility is itself uncertain, which compounds rather than resolves the original credibility gap.

ASOP No. 25 Section 3.4 and margins for adverse deviation. When both subject experience and the complement of credibility carry significant uncertainty, Section 3.4 directs the actuary to consider whether a margin for adverse deviation is appropriate. For GLP-1 loading, the relevant question is directional: is the greater risk that actual GLP-1 costs exceed the projection (producing losses) or that the projection exceeds actual costs (producing uncompetitive pricing)? Both outcomes have consequences, but they are asymmetric. Underpricing produces losses that cannot be recovered mid-plan-year; overpricing produces enrollment losses that compound over subsequent years through adverse selection.

Three Pricing Approaches in the Current Market

From reviewing publicly available rate filings and actuarial memoranda across multiple states, three distinct approaches to the GLP-1 pharmacy load have emerged for 2027 filing:

Approach	Method	Risk Profile
Full own-experience extrapolation	Project most recent 12-month GLP-1 trend forward at observed rate (25-40% annual growth). No credibility blending.	High variance. Overstates if growth is decelerating. Understates if growth re-accelerates after a plateau.
Credibility-weighted blend	Assign 30-50% credibility to own experience, complement with Milliman/Optum/Wakely benchmark. Produce blended trend.	Moderate variance. Outcome depends heavily on which benchmark is selected and the credibility weight assigned.
Explicit scenario loading with margin	Model base, moderate, and high scenarios for GLP-1 utilization and cost. Select a point estimate above the midpoint with explicit margin for adverse deviation per ASOP 25 Section 3.4.	Lower loss risk but higher competitive risk. Documents actuarial judgment transparently for regulators.

The naive trend extrapolation (approach 1) likely overstates the 2027 rate need for a specific reason: GLP-1 utilization growth rates observed in 2024 reflect pent-up demand from newly covered populations. As coverage matures and the initial surge of eligible patients fills prescriptions, growth rates should moderate toward a steady-state level reflecting new diagnoses plus some incremental coverage expansion. A 30% annual growth rate observed in the first 18 months of coverage is not a sustainable long-run assumption; it represents a period effect that will decay. But determining how fast it decays, and where it stabilizes, requires judgment that cannot be derived from two years of data alone.

State Coverage Mandates Complicate the Picture

Multiple states have enacted or are actively considering legislation that mandates coverage of GLP-1 medications for obesity in state-regulated health plans. These mandates directly affect 2027 rate filings because carriers in mandate states must price in coverage that may not have existed during the experience period used to develop projected claims.

Colorado's SB25-048, effective beginning 2027, requires insurers to offer coverage for FDA-approved anti-obesity medications including at least one GLP-1 medication. Illinois enacted GLP-1 coverage for state employee health plan enrollees through HB 3641 and a separate budget provision (5 ILCS 375/6.11c), effective July 2024. North Dakota amended its state Essential Health Benefit clause to mandate individual and group health plan coverage of GLP-1 and GIP medications. Washington appropriated $250,000 through SB 5167 to assess implementing a prescription drug benefit including FDA-approved weight loss medications.

For carriers filing 2027 rates in states with newly effective mandates, the pricing challenge compounds. Not only is the per-user cost uncertain, but the utilization rate itself becomes unpredictable because the mandate creates newly covered demand with no experience-period analog. A carrier that previously did not cover GLP-1 for obesity has zero claims data on which to base a utilization assumption. The entire GLP-1 pharmacy load must be developed from external benchmarks and analogy to other carriers that already offer coverage, with no own-experience credibility at all.

The Adverse Selection Feedback Loop

The pricing decision for GLP-1 has a characteristic that most pharmacy trend assumptions do not: it creates an enrollment composition feedback loop. Carriers that load conservatively for GLP-1 (low PMPM assumption, lower premium) will attract enrollees who expect to use GLP-1 medications, because those enrollees pay less for equivalent coverage. Carriers that load aggressively (high PMPM assumption, higher premium) will shed GLP-1 users to lower-priced competitors.

This feedback mechanism means the pricing assumption is partially self-fulfilling. A carrier that loads $1.50 PMPM for GLP-1 and attracts a disproportionate share of GLP-1 users will experience actual PMPM costs well above $1.50, producing losses. A carrier that loads $4.00 PMPM and loses GLP-1 users to competitors will experience actual costs below $4.00, but will have priced itself out of competitive position on overall premium.

The ACA risk adjustment mechanism partially mitigates this dynamic. GLP-1 users with diabetes diagnoses generate HCC-based risk scores that transfer payments from lower-risk enrollees. But GLP-1 users prescribed for obesity alone (without a diabetes diagnosis) do not generate the same risk adjustment transfer, creating a residual adverse selection exposure for carriers pricing GLP-1 aggressively.

Blue Cross Blue Shield of Massachusetts's decision to discontinue coverage of GLP-1 medications for weight-loss indications in 2026, reducing their premiums by approximately 3%, illustrates the competitive calculus. That 3% premium reduction becomes a competitive advantage against carriers that maintain coverage and must load for it. But if Massachusetts subsequently mandates coverage, the carrier faces a one-year repricing gap with no experience base.

State DOI Scrutiny of GLP-1 Trend Assumptions

Regulators are paying attention. CMS rate filing instructions for plan year 2026 already required issuers to explain in their actuarial memorandum how trend assumptions reflect current cost drivers, and the 2027 proposed rule continues that expectation. State departments of insurance in California, New York, and Washington have moved toward explicit disclosure requirements for the GLP-1 component of pharmacy trend in rate filing actuarial memoranda.

The practical implication for filing actuaries: the GLP-1 trend assumption is no longer one line item buried in an aggregate pharmacy trend figure. It requires separate justification, data documentation, and a clear articulation of how the actuary determined the credibility weight, selected the complement of credibility, and decided whether a margin for adverse deviation was appropriate. The actuarial memorandum must demonstrate that the filing actuary applied ASOP No. 25 and ASOP No. 8 (Regulatory Filings for Health Benefits) in developing the GLP-1 loading, with specific reference to the data limitations and the methodology used to address them.

Why This Matters for Pricing Actuaries

The GLP-1 credibility problem represents a specific instance of a broader challenge in health pricing: how to rate for a cost driver that is growing faster than the experience period can capture, where the complement of credibility itself is unstable, and where the pricing decision feeds back into the risk pool composition.

Document the credibility determination explicitly. Any filing that includes a GLP-1 pharmacy component should document: the number of exposure months available, the number of GLP-1 users in the experience period, the credibility standard applied (Buhlmann, limited fluctuation, or Bayesian), the resulting credibility weight assigned to own experience, the identity and source of the complement of credibility, and the rationale for selecting that complement over alternatives.

Distinguish level from trend credibility. A carrier may have sufficient data to establish the current GLP-1 cost level with reasonable confidence. But level credibility does not imply trend credibility. The growth rate itself requires observation across multiple periods to distinguish signal from noise. Filing actuaries should separately address whether their data is credible for level estimation (where it likely is) versus trend projection (where it likely is not), and apply different credibility procedures to each.

Monitor competitive positioning explicitly. Given the adverse selection feedback loop, pricing actuaries should model the enrollment composition implications of their GLP-1 loading relative to competitor pricing. If the carrier's GLP-1 PMPM is materially above or below the market midpoint, the actuary should model the expected change in GLP-1 prevalence among enrollees and adjust the projection accordingly.

Anticipate regulatory challenge. A filing actuary who cannot articulate the data basis for the GLP-1 trend assumption, or who relies solely on a proprietary benchmark without documenting why that benchmark is appropriate for the carrier's specific population, risks a regulatory objection letter. The filing should preemptively address the credibility gap rather than wait for the DOI actuary to raise it.