State of ACA Coverage: Opportunities and Challenges for Individual Market Open Enrollment 2019

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This article was originally published with co-author George Kalogeropoulos, CEO of HealthSherpa, on LinkedIn.

Several weeks ago, we shared our views with The Hill regarding challenges and opportunities facing the individual market in 2019 and beyond. In this edition of HealthSherpa Research, we expand upon those views with additional context and practical solutions for the coming OE season.

Fifteen months into the Trump administration, the Affordable Care Act remains the law of the land after several failed legislative attempts at repeal. Now, as we enter into rate-approval season for individual health plans, state insurance agencies, federal regulators, health insurance payers, employers and, most importantly, individual consumers face many challenges in making the most of open enrollment (OE) 2019. Yet they also have several opportunities to make the most of another year of the ACA.

Here are the four challenges that legislative inactivity will impact OE 2019, as well as four ideas for making the most of it.

  • Lack of market stabilization legislation
  • Individual Mandate zero-out
  • Recent Executive Orders
  • State activity and CMS waivers

Lack of Market Stabilization Legislation

Going into 2018, several activities converged to make for a challenging Open Enrollment (OE) period. First, an ongoing concern over the risk pool makeup of plans, along with initial underpricing by health carriers, led to massive rate increases year-over-year from 2017 to 2018. These economic factors, in turn, drove a number of carriers out of the individual market altogether, which made it appear at first that there would be a significant number of counties nationwide where there would be zero plans available to ACA-subsidized consumers. Luckily, that crisis was averted.

Yet, another, more pressing crisis that ended up leading to mixed results for the market was President Trump’s decision to discontinue the Obama-era policy of paying the Cost-Sharing Reduction (CSR) of ACA coverage. This non-payment to carriers, which Trump himself called an insurance company bailout, prompted health insurers to raise their individual plan premiums by an average of more than 20 percent to make up for the lost revenue.

While this development led to much greater premium costs that impacted non-ACA-subsidy-eligible individuals and families most drastically, the impact on those who were subsidy-eligible was, by and large, positive.

HealthSherpa’s enrollment data showed that the average monthly premium paid after subsidies in 2018 is $158.59, well below average costs of employer-based coverage and lower than the average cost of individual coverage from 2017. Furthermore, 18 percent of HealthSherpa enrollees pay $0 in monthly premiums, while more than 50 percent pay $50 or less.

While detailed analyses are pending rate submissions, the failure to include reinsurance and CSR relief in the omnibus spending bill is already being blamed for impending premium increases in the individual market. And without CSR payments, the rates may increase for non-subsidy-eligible individuals but those who are eligible for subsidies should be mostly shielded — but, of course, taxpayers as a whole will pick up that extra cost.

Individual Mandate Zero-Out

As of January 1, 2019, the Individual Mandate, possibly the most controversial single rule of the ACA, will no longer be enforceable thanks to a zeroing out of the tax penalty for non-compliance, passed as part of Tax Cuts and Jobs Act of 2017 in December.

There are two prominent views on the ramifications of this legislative update. On one hand, without a mandate, more people will choose not to get insurance, which will have widespread negative impacts on both total insured Americans as well as in the risk pool makeup of the individual market )because the young and healthy are most likely to forgo coverage.)

The other view is that the mandate never had a huge impact and hence won’t be a game-changer going forward. Plus, the relatively low decline in 2018 enrollments in the face of much confusion and drastically less marketing spend on OE awareness indicates that the impact will primarily be felt through the compounding problem of the risk pool overall, not a spike in costs in and of itself.

The key takeaway is that something that was once seen as central to the ACA working as designed has now been removed and we’re all unsure what exactly will happen. But whatever happens, it doesn’t bode well for the ACA’s objective of covering all Americans. A recent Kaiser Family Foundation tracking survey found that 9 in 10 2018 enrollees plan to re-enroll for 2019. On one hand, that’s a safe majority of those currently covered. On the other hand, 10 percent decline almost equals 1 million fewer people enrolled.

Executive Orders

Whereas the first two factors are relatively predictable, even if they’re bad news, the wildcards are what to expect from the three executive orders announced by President Trump in October of last year.

The one getting the most attention right now is the expansion of short-term, limited-duration insurance plans (STI’s) from their Obama-era max of 3 months to a longer 12-month maximum term. While the current ACA subsidy structure, especially with the CSR payments not being made, shields low-income individual consumers from cost increases that will likely ensue, middle-income and high-income individuals who buy health insurance on the individual market without ACA subsidy eligibility will likely be in even greater need of cost relief. Either that or they’ll have to select an “alternative coverage arrangement” that may leave them exposed in case of illness or medical emergency.

When combining the STI rule-change with another Executive Order — the expansion of Association Health Plans — there is the possibility of widespread disruption in both the individual and lower end of the employer health insurance markets. Both orders were made in an effort to combat high insurance premiums in particular while presenting individuals and small-business employers/employees with more options beyond the ACA. And while both may work together toward this end, they potentially contradict each other as well.

Association Health Plans are being expanded on the premise that small businesses should be able to more freely band together to gain leverage in health insurance purchasing. It’s an economically supportable idea — in fact, the “larger risk pool” concept is the basis for both self-insurance of large groups and the individual market under the ACA. The key issue as it pertains to these two orders is that enabling individuals to buy, and small employers to offer, STI’s essentially takes those individuals out of the larger risk pools. If they are young and healthy, then the remaining risk pool is more likely to see premium volatility based on higher healthcare utilization — the same issue with removing the Individual Mandate.

Plus, both of them would likely siphon off customers from the individual market, which further stresses the risk pools in each state for individual coverage. So, middle- and high-income individuals who cannot find an association to join or need more protection than an STI provides are in for sticker shock. (Former Congressman Henry Waxman of California proposes expanding ACA subsidies to those making more than 400% of federal poverty level by capping healthcare expenses at 10% of income for all Americans.)

State Activity and CMS Waivers

With continued inaction at the federal level, states have been forced to take matters into their own hands to try to stabilize their individual markets. Additionally, the CMS under Trump has encouraged states to come up with their own methods for addressing the ACA and other federal healthcare policies, most notably recent Medicaid work requirements and Idaho’s failed attempt to introduce non-ACA-compliant comprehensive plans that would reintroduce medical underwriting based on preexisting conditions. More creative-to-questionable plans are in the works and surely forthcoming.

The overarching theme is that federal inaction along with executive action have fragmented the individual insurance market in such a way that it’s driving more, and arguably unnecessary, complexity both for health carriers and consumers. The Commonwealth Fund has put out a useful study on “alternative coverage arrangements” like STI’s and healthcare sharing ministries that can confuse consumers and widen the cracks in the individual risk pool. From the report:

While these arrangements may be appealing to some healthy consumers, particularly because of their generally low upfront cost, they are typically far less protective than coverage compliant with the ACA and therefore less attractive, and less accessible, to individuals who believe they will need medical care. These coverage products siphon off healthy individuals who otherwise likely would have obtained insurance in the ACA-compliant individual market. As a result, they contribute to a smaller and relatively sicker risk pool in that market, with higher premiums and fewer plan choices for the consumers who remain. Although states have broad authority and ability to regulate these coverage arrangements, most generally do not.

In a nutshell, 50 different sets of rules will almost always be less efficient and cost-effective than one.

What can be done?

There is consensus that the challenges that lay ahead for the individual market are both broad and deep. There is less consensus on how to deal with it. While some of the issues are reliant upon public solutions that don’t appear to be imminent, there are several things that the private sector can do, and that the public sector can avoid doing, to make the most of OE 2019.

1. Help people get coverage.
Our last HealthSherpa Research article articulated how companies benefit by guiding their employees to coverage. Employers have a strong platform from which they can communicate to Americans who need health insurance. Using this platform benefits both their own economics and their employees.

But they’re not the only ones. As Charles Gaba notes in his analysis of our last piece, advocacy groups focused on increasing health coverage overall and public health coverage in particular can recognize the platform that companies have and work to make the most of it, even if it means a compromise or two that they can live with to make an impact for the greater good (read: more covered Americans).

Yes, companies like HealthSherpa have a personal stake in seeing to it that more Americans are covered. And yes, it may seem simplistic to say that helping people get coverage will help the market. But it will. More covered lives on ACA-subsidized plans means a larger, healthier risk pool. A larger risk pool means more predictability for insurers. More predictability for insurers means more stability in the market, which means potentially more competition, which means more competitive pricing. Less of all of these things means more of what we’ve seen for several years now: chaos bording on a “death spiral.”

2. Stop trying to pass something this year.
This advice may seem counterintuitive given the problems described, especially in relation to a lack of federal action. The problem is, at this point any action at the federal level would throw planning for 2019 into turmoil. To avoid last year’s multiple late-stage changes, Congress should move to other items on their agenda and take up healthcare reform and the individual market again after the midterms.

Likewise, Trump’s executive orders are worthy of discussion and consideration but shouldn’t be rushed — and having a September deadline for STI rules when OE starts in 60 days, isn’t very much time for such a large endeavor. We’re huge fans of moving fast, but you move fast when you’re in a speedboat, not when you’re steering a tanker.

3. Let rules normalize from state to state.
States are in a slightly smaller boat and able to move more quickly to adjust to the lack of support at the federal level. Yet allowing waivers at this point is a grand experiment with very few positives. Limit the acceptance of (and calls for) waiver ideas as a show of good faith to consumers.

4. Focus on the experience.
Speaking of consumers, remember that it’s consumers that everyone, no matter their political persuasion, is trying to help. We may disagree on how or by whom individuals should be covered, but there are not many who don’t believe in the general idea that having everyone covered is good for the economy and good for individuals. That’s why it’s important to remember that, whether an ACA-subsidized plan or an “alternative insurance arrangement,” it’s imperative that consumers know what they’re getting and if and how it addresses their needs.

A recent internal HealthSherpa study showed that more than half of those surveyed, when asked to pick one word to describe their enrollment experience this past year, chose “frustrated.” Only 7 percent chose “confident.”

Better communication about available options, better explanation of the benefits and costs of those options, and ultimately better support throughout, will only serve to make for a healthier individual market, both literally and figuratively.