- The health insurance exchanges created after passage of the Affordable Care Act may not serve as a truly effective marketplace for commercial payers since some national insurers like Aetna and UnitedHealthcare have been dropping out of operating through the exchanges in the last year.
An editorial from Health Affairs claims that the health insurance exchanges “are financially unstable.” The problems surrounding the health insurance exchanges are not based solely on the platform in which consumers can choose the best health plans to fit their needs, but more so on the policies of the Affordable Care Act that have impacted how payers can act.
Among consumers who receive a federal tax subsidy for their health coverage, the federal government holds tighter control on which type of plans can be sold and how they can be sold on the health insurance exchanges.
The type of populations signing up for policies through the exchanges tend to be sicker and require more costly care for commercial payers. This type of costly reimbursement for providers often leaves payers with significant financial losses and more insurers may continue leaving the health insurance exchanges, Joseph Antos and James Capretta of the the American Enterprise Institute (AEI) wrote for Health Affairs.
“The law also limits how much insurers can charge their oldest customers to reflect their greater use of health services, a practice known as age rating. Previously, premiums charged to the oldest customers were often as much as five times higher than those charged to the youngest. Under the ACA, the maximum premium charged for the oldest customers can be no more than three times the premiums charged to the youngest customers,” Antos and Capretta wrote.
“These restrictions have the effect of lowering premiums substantially for older and sicker customers, and raising them for young and healthy people who buy coverage on their own. Absent other changes, these provisions predictably shifted the customer base in the individual insurance market toward high utilizers of health services, and premiums rose to cover their elevated use of medical care.”
In 2017, premium costs for the remaining insurers operating through the public marketplace is expected to rise steeply. It seems that the risk adjustment provisions of the Affordable Care Act may not have worked well enough to outweigh the risks associated with serving more costly patient populations. Risk adjustment is meant to transition funds from payers serving younger, healthier populations to insurers serving riskier, sicker populations.
The Henry J. Kaiser Family Foundation conducted an analysis this past summer going more deeply into how payers leaving and entering the public marketplace affect consumers.
Payers like Aetna and Oscar have recently announced they’d be scaling back their participation in the ACA marketplace. Cigna, on the other hand, is looking to increase its footprint in the exchanges. The Kaiser Family Foundation looked at how many health plans consumers would have to choose from in the coming open enrollment periods.
The results show that, in 2017, most enrollees will still have three or more health plans from which to choose on the health insurance exchanges. However, the amount of consumers who have access to three or more health plan options will decrease in 2017 to 62 percent from the 85 percent seen in 2016, the report states.
Additionally, the report finds that 19 percent or 2.3 million enrollees on the public marketplace could face only one health payer and essentially have no real choices to choose from. This is very different from 2016 where only 2 percent or about 303,000 consumers had only one insurer available. The number of counties with a single insurer operating on the exchanges is expected to rise from 225 or 7 percent of counties to 974 or 31 percent of counties in 2017.
George Kalogeropoulos, Founder and CEO of HealthSherpa, spoke with HealthPayerIntelligence.com about some solutions that could fix various Affordable Care Act issues and strengthen the exchanges.
“One obvious solution is something that CMS has attempted to do within the context of the existing legislation: really tighten up those special enrollment periods so that payers aren’t getting a very negative risk pool. Also, potentially instituting continuous coverage requirement, which would allow payers to have an exclusionary period, is advised,” Kalogeropoulos said. “Possibly inserting some flexibility on the cap of the premium multiple is one solution. A 65-year-old can pay no more than 3 times what a 21 or 22 year old pays for premiums. Prior to ACA that multiple was more like 10 or 11 fold.”
“The net effect is that older people are underpaying and younger people are overpaying in premiums,” Kalogeropoulos continued. “It’s no surprise that not very many younger folks are enrolling. Essentially, improving the risk pool will benefit payers.”
The federal government will need to work with the health insurance industry in the coming years in order to restructure and strengthen the provisions of the Affordable Care Act and essentially enable payers to participate on the health insurance exchanges more successfully.