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November 1 marks the start of 2016 open enrollment for Affordable Care Act health plan marketplaces. So far, it looks like a mixed bag for both the Obama Administration and insurers.
More than 17 million people have gained health insurance coverage through the ACA marketplace plans, Medicaid or the individual market as a result of ACA policies, according to HHS this week. Boosting enrollment, however, will be harder going forward. The 22 million-person goal is looking unlikely and according to Secretary Burwell an improving economy may be at least partly responsible, as more people have access to employer-based insurance.
With some of the premium stabilization programs (so-called 3 Rs) payments delayed, plan rates that vary widely by state, and little visibility on federal exchange rates – we take a look at the marketplaces (aka “exchanges”) going into Year Three.
Early Data Suggest that Premiums Are Stable
On June 1, the Centers for Medicare and Medicaid Services (CMS) released a list of plans that proposed rate increases of 10% or more for the 2016 coverage year, leading to a rash of headlines (for instance, certain Blues plans).
But the double-digit premium rate hikes some predicted for 2016 are unlikely to materialize. Instead, premiums vary depending upon the insurance carrier and location. At this point we are looking only at proposed rates. State-based exchange figures are currently available in only a handful of states.
Health consulting firm Avalere analyzed silver plans across eight states (CT, DC, MD, MI, OR, VA, VT & WA) and found that insurers in those states requested an average premium increase of 5.8 percent over the 2015 plans. Kaiser Family Foundation (KFF) conducted a similar review, looking at the two lowest-priced silver plans in each of 11 cities where 2016 proposed rates were available. KFF found and average year-over-year premium increase of 4.4 percent, with premium changes ranging from a 10 percent decrease in Seattle, WA to a 16 percent increase in Portland, OR.
Why the substantial variation?
This is the first time insurers have a full year of claims data to help set rates for 2016. Insurers are able to look at actual services, especially the use of specialty prescription drugs, utilized by its enrollees to more accurately anticipate medical costs.
Other factors that could contribute to price increases include a phasing out of the Reinsurance and Risk Corridor programs that were designed to reduce risk for insurers and policies that extended non-ACA compliant plans through 2017.
Premium Stabilization Program (3Rs) Concern Some Insurers
Funding problems for one of the three premium stabilization programs — Risk Corridors – is creating uncertainty for Obamacare insurers that rely on the program to manage risk in their marketplace plans’ profitability.
Under Risk Corridors, companies that are profitable are required to share their gains with plans that have incurred losses. Standard and Poor’s found that the Risk Corridor program may be underfunded if funding comes solely from insurers as there are not sufficient profitable plans compared to those with losses.
Some insurers are now nervous that the payments may not materialize, or come in future years.
CMS delayed the scheduled release of Risk Corridor calculations due to data discrepancies. The agency is seeking more data from health insurers in order to verify the accuracy of plan submissions.
While two of the 3Rs — Risk Corridors and Reinsurance — sunset after 2016, Risk Adjustment was set up as a permanent program. It, too, is showing signs of strain. Earlier this year, CMS warned Florida health insurance issuers that they could receive lower-than-expected Risk Adjustment payments for 2014 because not all issuers may be able to pay into the system.
While letters were only sent to Florida issuers, some speculate that similar action might be needed in other states. There are certainly markets where an issuer became insolvent, which CMS would have to account for.
While the Florida issue relates to 2014 payments, some experts believe that it could indicate trouble ahead.
Enrollment Robust But 2016 Expectations Should Come Down
The government is meeting its enrollment goals.
As of June 30, almost 10 million people had active insurance coverage procured through the marketplaces. CMS has basically met its 2015 target of 9.1 million enrollees. 84 percent of those enrollees received advanced premium tax credits, with an average credit amount of $270 per month.
As of mid-September, over 15 million adults had obtained coverage through sources such as the Exchanges and Medicaid over the past two years. Another 2.3 million obtained coverage through the ACA’s popular provision allowing young adults to stay on their parents’ plan until age 26.
This week, however, HHS Secretary Burwell stated that upcoming enrollment season is going to be more difficult because the pool of uninsured people is shrinking. HHS also released new estimates showing that 10.5 million uninsured people will be eligible for Exchange coverage in the next enrollment season, which starts November 1.
The Congressional Budget Office projected previously 21 million individuals will enroll in ACA in 2016.
Total Medicaid and CHIP enrollment reached nearly 72 million as of June 2015. This exceeds Medicare enrollment, which currently stands at over 50 million.
Medicaid enrollment climbed by almost 23 percent since October 2013 when ACA enrollment began. Medicaid enrollment is up 30 percent for states that expanded Medicaid under the ACA. States that did not expand Medicaid reported an increase of almost 10 percent over the same period.
Grading the Mixed Bag
2016 could be a B+ year for the government and plans. Enrollment goals will be difficult to meet and premium headlines will continue as final rates are announced. Recent healthcare consolidation has also been linked to the President’s signature domestic achievement. Ultimately, consumers are able to access to a variety of health plans.
Ipsita Smolinski is Managing Director for Capitol Street, a healthcare research and consulting firm in Washington, DC.