Obamacare Costs Level as Private Insurance Increased, HHS Says


The costs per person for Obamacare enrollees were essentially unchanged between 2014 and 2015, while per-person costs in the broader private health insurance market rose by at least 3 percent, according to data released by the Department of Health and Human Services on Thursday.

The data suggests that Obamacare’s individual marketplace improved and became healthier as more people enrolled. Experts say this is crucial to the long-term stability of the Affordable Care Act exchanges.

The data marks the first comprehensive look at how the Obamacare insurance risk pool evolved over its first two years of operation. HHS used data submitted by insurers for the risk adjustment and reinsurance programs, which are designed to mitigate insurers’ costs, to produce the report.

“The Affordable Care Act has expanded access to coverage for millions of Americans by reforming the individual market,” said HHS Secretary Sylvia Burwell. “Today’s news shows the continuing strength of the marketplace as a source of affordable health coverage for millions of Americans.”

While this is good news for the exchanges’ long-term viability, it doesn’t make up for losses incurred by insurers that underpriced their products during the exchanges’ first year of operation. Premium increases between 2014 and 2015, which averaged 2 percent, were sufficient to keep up with ACA claims costs. But they weren’t enough to make up for the gap between 2014 premiums and costs or the partial phase-down of the Obamacare reinsurance program, the HHS report said.

The report’s release comes as insurers across the country are proposing double-digit rate increases on Obamacare exchanges for 2017. Some insurers have announced that they will no longer be participating in exchanges, and several others have publicly questioned their future participation.

Opponents of the health care law have seized the rate requests and insurer pullouts as evidence the law isn’t working. The Obama administration has pushed back against that argument, saying the large 2017 increases are likely a one-time result of insurers’ underpricing in anticipation of the phaseout of Obamacare’s risk mitigation programs. Administration officials also repeatedly note that the proposed rate increases are only requests, and actual rate increases will likely be lower.

America’s Health Insurance Plans, the group representing health insurers, quickly responded to HHS’s report by calling it “overly optimistic.”

“The reality is that the risk pool has not significantly improved. That is a serious concern,” said Marilyn Tavenner, president and CEO of AHIP. “This analysis also overlooks the current challenges that are driving up premiums for consumers, including the state of the risk pool at the local level and the lack of pre-enrollment verification for special enrollment periods.”

Tavenner has repeatedly warned about high rate increases in 2017 and emphasized insurers’ struggle to adjust to the changing health care landscape.

HHS officials acknowledge that the latest data doesn’t speak to individual insurers’ profitability or business models. “Importantly, our analysis today is not an analysis of issuer finances, and improving risk pools are not an assurance of profitability,” said Aviva Aron-Dine, senior counselor to the secretary at HHS, during a call with reporters.

The report found that states with higher-than-average 2015 enrollment also had greater-than-average reductions in per-person costs, furthering the administration’s conclusion that greater enrollment creates a healthier marketplace. In the 10 states with the highest growth in enrollment, per-member claims costs fell by 5 percent.

Data for 2016 is not yet available, but HHS officials said Thursday’s data is a good sign for the future.

“Today’s analysis is more evidence that the foundation of the health insurance marketplace is strong,” Aron-Dine said. “The ACA individual market evolved just as would have been expected.”

Costs on the broader private health insurance marketplace, which includes Medicare Advantage and employer-sponsored insurance, are estimated to have grown between 3 percent and 4 percent in 2015. Estimates of the 2015 medical trend averaged 6 percent.

HHS has proposed several changes to exchanges in the past several months in an attempt to improve the marketplaces. These include cracking down on special enrollment periods and proposing ways to cut back on abuse of short-term plans. The administration also plans to strengthen its outreach efforts during the 2017 enrollment season.

Morning Consult