Is the Future of the ACA Looking Up?

December 21, 2018

Paul Nicolaus

The United States most significant healthcare reform law is consistently in headlines, conversations, and the minds of payers and carriers alike. Since its inception, its effectiveness has been a subject of debate but as another year comes to a close, attention turns to what 2019 will bring. 

In recent years, the Affordable Care Act (ACA) and its related Health Insurance Marketplaces have seen turbulent times. There was real possibility of repeal, talk of the law collapsing under its own weight, and ongoing regulatory changes. And yet, despite concerns raised about its stability, there are promising signs emerging. In future enrollment, consumers purchasing insurance through the exchanges may even experience a pleasant surprise as average premiums’ increases are far less in recent years and in some cases have even decreased. 

According to the Centers for Medicare & Medicaid Services (CMS), average premium rates will fall in 2019 for individual plans sold on the HealthCare.gov platform, which marks the first time average health insurance premiums have dropped since implementation of the exchange back in 2014. Specifically, the average premium for the Second Lowest Cost Silver Plan (SLCSP), the benchmark used to establish the amount of financial assistance individuals and families receive, is expected to drop by 1.5%. By comparison, the average rates for those plans rose by 37% between 2017 and 2018. 

Kathy Hempstead, PhD, senior policy advisor of the Robert Wood Johnson Foundation, the nation’s largest philanthropy dedicated exclusively to health, said, “I think there are a lot of signs of stabilization this year,” noting that over the summer the rate filing season was informative as they saw plenty of entry and expansion from carriers. 

Oscar announced that it would be nearly doubling its existing footprint heading into 2019, with new expansions into Florida, Arizona, and Michigan. Centene Corporation, which grew its exchange members from 960,000 to 1.6 million at the end of 2017, is also expanding its offerings in 2019 under its national brand, Ambetter. On October 10, Ambetter will sell plans in four additional states (Pennsylvania, North Carolina, South Carolina, and Tennessee) and will add new counties in six others (Florida, Georgia, Indiana, Kansas, Missouri, and Texas). 

According to CMS, there are 23 more issuers for 2019 than those participating during open enrollment in 2018 and 29 current issuers are expanding their service area into more counties. Anthem, Wellmark, Molina, and Cigna are all returning to markets they left in 2016 and 2017. Another potential sign of market strength is the diminishing number of single-issuer counties, which has fallen from 56% in 2018 to 39% in 2019. 

On the sell side, Dr Hempstead said, there’s a lot of optimistic enthusiasm and interest in participating, which is a stark contrast from the year before when there had been many exits and fear that no one was offering coverage in parts of the country. “As it turned out,” Dr Hempstead added, “We’ve really seen almost a reversal of that pattern.” The result is a better-looking market this year and added choice for many consumers. 

Insurers saw better fiscal performance in the first half of 2018 than in all the earlier years of the ACA, according to a Kaiser Family Foundation analysis, and are returning to levels of profitability seen prior to the arrival of Obamacare. The results suggest that the market remains stable, although the report acknowledges that markets in some areas of the country remain precarious due to little competition and a lack of healthy enrollees. It also points to the lingering uncertainty caused by recent policy changes.

It is this uncertainty that makes Bryan Niehaus, JD, CHC, vice president of health care consulting firm The Advis Group, cautious to say the marketplace is, in fact, stabilizing. The growth in the number of insurers participating in the marketplace and the anticipated decrease in rates for the 2019 plan year are a positive trend, but they are only short-term indicators. He believes that recent changes, along with the potential for additional actions, will continue to destabilize the ACA Health Insurance Marketplace.

Impact of Recent Policy Changes 

Enacted in late 2017, The Tax Cut and Jobs Act (TCJA) reduced the financial penalty for not obtaining insurance coverage to $0, effective with the 2019 benefit year. No one knows with certainty if this will make the ACA marketplace better or worse, Mr Niehaus explained, but the concern is that healthy individuals will have less incentive to purchase coverage. “If fewer people purchase coverage, a sicker and more costly ACA marketplace population, with associated increases in premiums, is the result.” 

Another big question mark stems from the growth of insurance plans that are not subject to ACA rules and regulations. In June, for example, the Department of Labor released its final rule calling for the expansion of association health plans (AHPs) for small businesses and self-employed individuals. These association-offered policies, typically to members of a specific trade or profession, allow employers to band together to obtain coverage as if they were a single large employer. This rule loosened the requirements under which a group of employers can join together to form an AHP and become exempt from federal and state small-group or individual market consumer protections.

In addition, CMS finalized a rule on short-term, limited-duration insurance that will allow consumers to buy these types of policies for periods of up to 1 year and to renew for up to 3 years. Previously limited to 3 months, this form of insurance was designed to fill coverage gaps for those in need of temporary coverage when transitioning from one health care plan to another. These policies are not required to abide by the same provisions that apply to individual health insurance coverage under the ACA, which means they can avoid covering entire categories or deny coverage to those with pre-existing conditions.

The administration has also expanded the Section 1332 State Innovation Waiver process, allowing states to apply for waivers that would let them alter the essential benefit requirements of the ACA. According to CMS, the process  permits states to “pursue innovative strategies for providing their residents with access to high quality, affordable health insurance while retatining the basic protections of the ACA.” Waivers are approved for 5-year periods and cannot increase the federal deficit. 

“So that means that states can apply to offer plans that don’t cover things like prescription drugs or mental health, which of course reduces the cost of those plans,” explained Jack Meyer, PhD, an independent consultant in Washington, DC. “But that’s not a real reduction in the cost of health care. It just means that people who are young and very healthy can find cheap benefit plans, and that raises premiums for people who are older and sicker but not old enough for Medicare.”

Although the what-ifs created by these types of changes tend to lead to premium price bumps, rate increases for 2019 are modest. Many insurers over-corrected with earlier rate increases to guard against policy uncertainty and the end of cost-sharing subsidy payments. In fall 2017, the Trump administration terminated reimbursement payments to insurers for the cost-sharing reductions (CSR) stipulated by the ACA. “Insurance companies were kind of left holding the bag because they are required under the law to make those low-cost sharing plans available,” said Dr Meyer, “but suddenly they weren’t getting paid back for it.”

The vast majority of state insurance commissioners either allowed insurers to raise premiums before the administration terminated payments back to them or allowed them to do so shortly after the termination of CSR. The decision to terminate those programs led to steep premium increases on top of the increases that had already been approved. Since the premium subsidies ride up with the premiums, many consumers were largely shielded from the cost of this—but the government was not. “The federal government saved money out of one pocket by not paying the insurers back for their losses, so to speak, but they spent even more out of the other pocket,” Dr Meyer added, and all this “kind of roiled the insurance markets and cost the taxpayers some money.”

Could the Outlook Be Even Better?

In addition to more tangible policy changes, Dr Hempstead pointed out the variety of rhetorical and symbolic moves that could be perceived as attacks on the ACA marketplace. Beyond the threats against the individual mandate, the attempts to eliminate the ACA, and the predictions that it would collapse under its own weight, there have been other notable developments. 

The open enrollment period has been shortened from 3 months to 6 weeks, HealthCare.gov has been taken down one day a week, and funding for enrollment assistance has been drastically reduced. Nonprofit organizations that provide navigators in states using the federal online marketplaces will receive a share of $10 million for the 2019 plan year, compared with $37 million in 2018 and $63 million in 2017. 

Dr Hempstead said this combination of changes and attacks both literal and symbolic created an unstable environment in the eyes of many causing carriers to withdraw. When other carriers could not turn a profit, they also left. While the outlook seemed bleak, Dr Hempstead pointed out that she “believes there is an inflection point in the business narrative that differs from that of the political storyline. Some carriers figured out how to successfully sell products and turn a profit. “So even though there was a lot of exit, I think the companies that stayed in the market were more successful than they had been in the past and had learned what it was going to take to make money in the market.”

Much of what we are seeing in terms of recent action is the expansion by those that have already been involved in the exchanges. “There’s a little bit of return to market by Anthem, a little bit by Molina, but we’re not seeing a lot of brand-new carriers come in,” Dr Hempstead said. She went on to say that major players like United and Humana have not returned so the remaining players are overtaking more markets. 

One of the details that Dr Meyer finds most promising is in February of 2017, there were 10.3 million people in the marketplaces and that figure rose to 10.6 million as of February 2018. It’s only a slight increase, he acknowledged, but it occurred over a one-year period in which a variety of policy changes threatened the viability of the marketplaces. The ACA has been under siege and faces some problems as a result, he added, but the law has put down deep roots in our health care system and is rather durable in spite of the attacks it has faced to date.

Although the exchanges do appear to be in better shape this year, some experts say the outlook could be even better if it were not for the variety of actions taken to chip away at the ACA. In a USC-Brookings Schaeffer Initiative for Health Policy analysis, for example, Matthew Fielder examines how premiums would change without several policy changes that will go into effect for the 2019 plan year. The analysis concludes that in a stable policy environment, nationwide average premiums for individual market plans would likely fall by over 4%.

Location Matters 

Experts recommend examining premium price changes for insight into the relevance of location. National averages do not necessarily offer up a complete picture considering the wide variability seen from state to state. A look at the CMS report on average monthly premium changes (for a 27-year old single nonsmoker on the benchmark SLCSP) reveals a 26% price drop in Tennessee, for example. On the flip side, North Dakota is facing an average increase of 20%. 

“I think the broad reason for significant state-specific rate drops or increases for 2019 is really a product of historic rate trends, rather than any single policy shift or insurer-specific factors,” explained Emily Curran, MPH, research fellow with Georgetown University’s Center on Health Insurance Reforms. She also noted, when considering price drops and increases for 2019, it is important to realize where states landed last year because of the overcorrection that led to significant premium price increases. 

While North Dakota may have the highest average increase, it only raised rates last year by 8%, which was low compared to the majority of states. And while Tennessee’s decrease may be an impressive statistic at first glance, a look back to the previous year reveals that the state experienced an average increase of 56%, which was one of the highest price changes from 2017 to 2018. 

Additional factors like added competition also affect statistics. In Tennessee, for example, two new carriers, Bright Health and Celtic Insurance, entered the market for 2019. This increased competition in key markets like Chattanooga, Knoxville, and Memphis, where there was previously only one carrier, noted Mr Niehaus. 

Pennsylvania and New Jersey are two more examples of states experiencing sizable premium decreases. Pennsylvania was a state that had a number of counties with only one carrier last year, Dr Hempstead explained, but Centene came to Philadelphia, adding competition, and many of their existing carriers expanded their presence. “So many markets became more competitive,” she said, “and because of that people didn’t have as much pricing leverage as they did before.”

Dr Hempstead explained that her home-state of New Jersey got it right from the beginning because it had guaranteed issue before the ACA and the carriers understood how to sell the product. Beyond that,Oscar returned to the New Jersey market. Other factors playing into the premium price drop could include the state’s individual mandate, she added, or its state-based reinsurance program.

While these examples of double-digit percentage increases and decreases are evident, rates have been less volatile across the board. Insurers are continuing to gain a better understanding of their membership and, to a certain extent, have learned to anticipate federal uncertainty and build it into their rates, Ms Curran noted. “I’ve also seen closer insurer-state regulator collaborations over the past year,” Ms Curran added, “which can give insurers greater confidence to remain in the market if they feel the state is committed to stabilization.”