The Affordable Care Act’s health insurance exchanges have proven to be quite sturdy despite a barrage of federal actions that threatened to topple them. The picture of the exchanges that emerges from the CMS’ final open-enrollment data is far from the imploding market that the Trump administration and countless headlines over the past year warned about.
Though enrollment in the exchanges slipped and insurers hiked premiums by an average of 30%, the size of the premium tax credits available to most exchange enrollees ballooned enough that the average subsidized shopper paid a lower premium for coverage than the year before.
Even so, the individual on-exchange ACA plans remain unaffordable for millions of people who aren’t eligible for financial help. Congress has yet to pass legislation to bolster the market and bring down premiums, and is unlikely to do so before insurers must file 2019 rates later this spring. New threats, including the expansion of short-term medical and association health plans, are coming down the pike, promising to lure healthy people away and cause even higher premium hikes next year that unsubsidized enrollees may not accept. If consumers can’t afford coverage and drop it, insurers have a smaller incentive to keep selling plans in the individual market. The more people become uninsured, the more uncompensated care hospitals must swallow.
What’s left? “A weird mix of having a relatively persistent subsidized market, coupled with only the sickest nonsubsidized enrollees, which is not the way anyone would design this to work,” said Erin Trish, associate director of health policy at the University of Southern California’s Schaeffer Center.
Here’s a look at the current state of the ACA exchanges.
Enrollment dips modestly
Enrollment in the ACA exchanges dipped just 3.3% to 11.8 million this year from 12.2 million in 2017. Leading up to open-enrollment, which ran from Nov. 1 to Dec. 15 in most states, experts were expecting sign-ups to fall sharply. The Trump administration slashed funding for open enrollment advertisements as well as enrollment assistance. It also gave shoppers less time to pick a plan, truncating the open-enrollment period to 45 days from the usual 90 days.
Katherine Hempstead, who directs the Robert Wood Johnson Foundation’s work on health insurance coverage, said the fact that just 400,000 fewer people enrolled shows “health insurance is a need-to-have for most people. People who are subsidized are going to really stick with it as much as possible.”
The final enrollment tally bodes well for health insurers, who are more likely to keep selling coverage if a large group of consumers sign up. Insurers have a harder time turning a profit when selling plans to a smaller, sicker pool of enrollees with few healthy consumers to balance out the risk. If they don’t make a profit, insurers aren’t likely to keep selling individual coverage. Several large national insurers, UnitedHealth, Aetna and Humana, have already called it quits or scaled back their participation.
Where the exchanges are working and where they’re not
Some states’ exchanges are performing better than others. States that use the federal HealthCare.gov platform generally fared worse, with enrollment dropping an average 5%. Sign-ups in the 12 states that run their own exchanges were virtually flat compared with 2017. Many state-based marketplaces stepped up advertising in the face of federal marketing budget cuts, which could explain in part why they performed better.
Premiums vary widely across states
Premiums shot up more than 30% in the 39 HealthCare.gov states, averaging $621 per month, compared with $476 in 2017. An analysis of CMS data shows that the average 2018 premium across all states was a bit higher at $631 per month, but missing 2017 data for some states makes it difficult to show a comparison. Unsubsidized members across all states paid an average $522 per month for 2018 coverage. Increasing premiums—along with reducing their footprints—has helped many health insurers, such as Anthem, Cigna and Highmark Health, turn a profit on the insurance exchanges for the first time in 2017.
Many Americans who don’t receive financial assistance can’t afford those sticker-shock prices, and more and more are thinking about going uninsured or opting for a cheaper alternative, like a short-term medical plan. As the number of uninsured and under-insured rises, so does the amount of uncompensated care at hospitals.
Like enrollment rates, premiums varied widely by state. Exchange enrollees in Wyoming were hit with the highest premiums at an average $983 per month, while those in Massachusetts paid the lowest rates at $385 per month.
The effects of “silver-loading”
Most exchange enrollees didn’t pay those sky-high prices. About 83% of consumers across the nation had their premiums reduced by an advanced premium tax credit, which is one type of federal financial assistance available to people with incomes less than 400% of the federal poverty level (roughly $48,000 for an individual). The average HealthCare.gov enrollee who received a premium tax credit paid about $89 per month for coverage, down from $106 in 2016. In Oklahoma, the average subsidized enrollee paid just $37 a month—the lowest of any state.
Subsidized premiums dropped because tax credits increased. Last year, savvy state regulators and insurers deployed a strategy to offset the effects of the Trump administration’s decision to end another form of financial assistance—cost-sharing reduction payments—that lowers exchange enrollees’ out-of-pocket costs. CSRs have historically lowered copayments and deductibles for ACA plan members with incomes lower than 250% of the federal poverty level.
When President Donald Trump stopped paying the CSRs at the end of 2017, insurers built rate increases attributable to the CSR cutoff into only silver plan premiums, which are used to determine the premium tax credit. As premiums went up, so did the size of the tax credit consumers received, meaning that most subsidized enrollees never felt the effects of big price hikes.
Larger tax credits allowed some exchange shoppers to find zero-premium bronze plans or lower-cost gold plans. As a result, fewer people—62.6%—enrolled in silver plans in 2018, down from 71.1% in 2017. Enrollment in bronze and gold plans, on the other hand, increased. Metal tiers represent the actuarial value, or the average share of health costs covered, by the plan. Gold plans pay for a larger share of the patient’s health costs.
Experts worry that people switching to bronze plans may have higher out-of-pocket costs they can’t afford, prompting them to forgo care or take on debt. Bronze plans have higher deductibles and often don’t offer cost-sharing for services before the deductbile is met.
“When you enroll in plans with higher deductibles, you use less care,” Trish explained. “People dramatically reduce their use of healthcare and not necessarily in smart ways.”
The zeroed-out individual mandate penalty, potential expansion of short-term and association health plans, and the CMS’ final rule allowing states greater flexibility in determining a menu of essential health benefits all threaten to destabilize the individual market and cause higher premiums and lower enrollment in 2019. Americans who don’t qualify for subsidies will bear the brunt of any premium hikes that stem from these challenges come the sixth open-enrollment period, kicking off in November.
With a federal administration and Congress unwilling to implement policies or pass legislation that would help to keep premiums lower, such as cost-sharing reduction payments or a reinsurance pool for high-risk consumers, experts say it will be up to states to bolster their markets. Some, particularly Democratic states, are considering their own coverage mandates, though such policies are unpopular. Others may work to put restrictions on short-term medical plans. But one thing is for certain: The pervasive uncertainty surrounding healthcare rules and regulations that was a hallmark of 2017 is not dissipating any time soon and will once again be a challenge for states, insurers and consumers come the sixth open-enrollment.