- Payers participating in the individual health plan market will face challenges in 2019 based on the planned expansion of association health plans (AHPs), increased competition, and changing provider negotiations, according to the Urban Institute.
The Urban Institute believes that volatility surrounding federal policy will create new individual market adaptations among payers. Commercial payers will strategize future individual health plan products in response to changes in federal healthcare policies.
Healthcare payers that sell individual health plans previously responded to ACA changes by raising premium rates to compensate the loss of federal cost-sharing reductions (CSRs). Payers also implemented cost-containment strategies, or fully exited from individual markets, to remain financially stable.
“Insurers are assessing the impact of the individual mandate penalty repeal, proposed rules on AHPs and short-term plans, and legislation to restore CSRs and help insurers mitigate the risk of patients with significant health care costs through reinsurance,” said the report.
Newly proposed policies that re-introduce CSRs may create even more market disruptions instead of producing stabilization, the team found.
Payers increased their individual premiums by up to 30 percent in 2018 to offset CSR losses. Several payers and actuaries believe the CSRs are generally a beneficial policy to stabilize the individual market.
However, many payers suggest that removing the CSRs created improvements in health plan affordability for individual plan consumers.
“Because most states allowed or required insurers to concentrate the premium hike on silver-level marketplace plans, eligible consumers’ premium tax credit subsidies were commensurately increased,” the team said. “As a result, premiums for many gold-level plans were close to or even lower than those for silver-level plans, and many consumers were able to purchase bronze-level plans with a $0 premium.”
An executive order from Trump, and additional federal support to expand the sale of AHPs, is causing payers to explore short-term plans and AHP markets for the future.
The report found that payers believe short-term plans and AHPs unfairly target healthy, low-risk members and will create new challenges in consumer affordability. Payers believe they are likely to sell AHPs and expect their competitors to do the same.
“One of these insurers concluded that short-term policies are ‘not the right thing for this organization’ because they are targeted to people who make too much money for ACA subsidies,” the report said. “On the other hand, traditional commercial carriers reported that they are going to track the market closely and potentially market these coverage options.”
Payers believe that newly formed market monopolies within the individual market will create additional barriers for new individual market participants.
Individual health plan monopolies make it hard to compete because they have negotiated competitive rates with provider networks. New payers are likely to experience issues developing provider networks without a strong share of the market, the team suggested.
“In 2018, 52 percent of US counties are covered by a single insurer,” the team found. “In such a monopoly situation, a commercial insurer can survive. But in other markets, competition is pushing insurers to offer exclusively narrow-network plans with lower provider payment rates.”
Provider monopolies in rural insurance markets are also likely to challenge payers when negotiating fair rates for healthcare services, the team believes. The provider monopolies will likely lead payers to raise future premium rates in order to adequately cover healthcare costs.
“As a result, insurers projected slight declines in enrollment for subsidized individuals and larger declines among unsubsidized individuals,” the report said. “Although most insurers were interviewed before the end of open enrollment, one insurer had already observed a decline in its off-marketplace enrollment.”
Success within the individual health plan market requires stable, long-term policies that allow payers to anticipate market changes, the team concluded. Ultimately, payers are likely to respond to lack of stable policies by raising premiums and inadvertently weakening individual risk pools.
“Going forward, insurers will be watching closely how consumers respond to the lack of an individual mandate and the availability of new coverage options; a worsening of the marketplace risk pool will likely cause many insurers to reduce their market presence, will cause all to increase premiums, and may lead to more exits,” the team said.