Would Clinton’s Health Plans Help Struggling Insurers on Exchanges?

(Rob Kunzig/Morning Consult)

Hillary Clinton’s health care plan clearly intends to tackle affordability issues on Obamacare exchanges. Less clear is whether — or how — it deals with the increasingly prominent issue of insurer participation and financial viability in the marketplace.

A string of large health insurers have recently announced they will not be participating in most marketplaces next year, citing losses. This week, Aeta announced it will withdraw from all but four states, refuting the idea that losses and withdrawals were anomalies rather than a trend to be reckoned with. The announcements follow the collapse of most of the health care law’s nonprofit co-op plans and are occurring at the same time as double-digit rate increase proposals in some areas in 2017.

While some experts say addressing consumer affordability issues will, in turn, increase insurers’ profitability on exchanges, others say the Democratic nominee’s proposals fall short of addressing the issue. Some even say a public option, which she has proposed, would only make things worse for private plans by pushing premiums artificially lower.

“The issues of affordability and insurer participation are related,” said Larry Levitt, senior vice president at the Kaiser Family Foundation. “Ultimately, I think increasing enrollment is key to keeping the marketplaces stable and attractive for insurers, and increasing affordability would help to do that.”

But, Levitt added, “I’d put the public option in a different category. And it depends a lot on the details.”

Donald Trump, on the other hand, has vaguely committed to repealing and replacing the Affordable Care Act, but offered almost no detail on what a replacement should look like. What little detail the Republican presidential nominee has offered in terms of health policy has often contradicted itself or clashed with traditional conservative ideology. Thus, it’s impossible to assess how a Trump presidency would address insurer issues.

Clinton has put forward a wonky set of health proposals designed to build on and improve the ACA. They include enhancing federal subsidies offered to offset the cost of premiums for low-income people, creating a tax credit to help with out-of-pocket costs, strengthening open enrollment efforts and requiring insurers to offer three free doctor’s visits before a deductible kicks in.

She has also proposed introducing some version of a public option to exchanges, as well as implementing a Medicare buy-in for people older than 55.

“Hillary Clinton has outlined concrete plans to make health coverage more affordable in and out of the marketplaces, with more choices, expanded relief for costs, aggressively containing prescription drug expenses, and the choice of a public option,” said Jesse Ferguson, a spokesman for Hillary for America.

There is growing talk of a public option among Democrats. President Obama himself proposed the idea in an article published in The Journal of the American Medical Association. Sen. Bernie Sanders (I-Vt.) said Aetna’s withdrawal pointed to the need for a government health care option.

But there are many ways to structure a public option, and as always the case with health policy, details matter. Allowing a government-run plan to operate in every marketplace would likely have a much different effect than allowing such a plan to participate only in areas with limited competition.

Regardless, there is some concern a public option could price lower than private insurers, creating downward pressure on private plans’ premiums. This is problematic, considering premiums already are not sufficient to compensate for claims paid out.

“I do think it would be difficult for private insurers to compete side-by-side with a public option if the public plan has significantly lower provider payment rates. A public option could instead be designed to serve as a backstop in areas where no insurers are willing to participate,” Levitt said.

Some marketplaces have already stabilized themselves and a public option could throw off the balance by pricing lower than private plans could handle. But in other places, where consumers have only one or even no options to choose from, instituting a public option useful.

But these are details often left out of campaign platforms and later developed as either the administration or Congress drafts policy.

And with little to no health details emerging from the Trump campaign, the Clinton campaign has little incentive to release further detail on an already controversial policy.

Chris Jennings, an outside advisor to Clinton, said her policies aimed at making exchanges more attractive and affordable would also make them more favorable to insurers. One of the main issues with the exchanges is the current population is sicker than insurers had anticipated, and the people who have held back from enrolling are almost certainly healthier than those who have already joined the marketplace. Thus, enticing healthier people to enroll would help balance the healthy-to-sick enrollee ratio.

“The combination of all those policies would both make health care more available [and] more affordable,” Jennings said. “It would attract more plans to compete because there would be a more attractive population to insure.”

Besides, he added, “People sometimes compare to Nirvana, as if we were in Nirvana before. The reason we even have this debate is people couldn’t access affordable coverage.”

But some experts are less sure Clinton’s policies would have a trickle-down positive effect on insurers. While they might encourage more robust enrollment in the individual market, her plans might not go far enough to effectively address insurers’ problems.

“She’s really talking about consumer protections and consumer affordability, and, in fact, I would say there’s nothing in her proposal that really targets some of the challenges facing insurers in the market. I think that’s something they’re really going to have to re-evaluate heading into 2017,” said Caroline Pearson, senior vice president at Avalere Health, an independent consulting firm.

“I think Clinton might need to consider a pretty significant ACA stabilization package of legislation for 2017 that goes beyond some of these consumer-oriented changes and addresses risk mitigation programs — so changes to risk adjustment or reintroducing reinsurance — and also may consider things around bigger carrots and sticks to get more people enrolled in the market,” Pearson added.

But for all the talk of a public option, it is likely politically unrealistic. Even when Democrats had a filibuster-proof majority in the Senate, a public option was removed from Obamacare because it was too liberal for more centrist Democrats. Instead, the co-ops were included in the health care law as a way to stabilize premiums on exchanges.

This means although the right may not like the idea of a public option, it’s far from time to worry about it, said Tom Miller, a resident fellow at the American Enterprise Institute.

A public option is “not much more of a threat than co-ops were, and I think we saw that play out,” Miller said. “It’s one of those hypotheticals that seems like much more of a hypothetical threat than reality.”

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