Struggling to Stabilize the Exchanges

Six years after passage of the Affordable Care Act (ACA), the individual and small-group insurance markets—the markets that the ACA remade—are still having growing pains. Health insurers have endured large losses and a number of ACA-created co-ops and other small insurers have failed. Consolidation among providers and insurers is an increasing and concerning trend. And many insurers are poised to raise premiums substantially for 2017, further stoking frustration with the insurance industry.

Even as the press vilifies insurers, however, the ACA’s supporters can’t afford to be indifferent to their struggles. Private insurers sell the managed care plans that are the central vehicle for expanding access to middle- and lower-income Americans. One day, those plans may cover many of the 11 percent of Americans who remain uninsured.

Part of insurers’ difficulty is that the risk pool in the individual and small-group markets, particularly on the exchanges, is sicker and smaller than originally projected. But the three programs—reinsurance, risk corridors, and risk adjustment—that the ACA’s drafters would hope stabilize premiums in the revamped markets have also not performed as expected. Dashed expectations have led to market instability and to a flurry of lawsuits around the “3Rs.” What does this unpredictable and difficult situation mean for 2017 and for the ACA more generally?