The State of the ACA Marketplaces: Making Sense of Individual Market Rate Filings
More than 20 million Americans have gained coverage due to the Affordable Care Act (ACA), bringing the uninsured rate to its lowest level in history.(1) Those gains are due in part to the ACA's individual market reforms, which prevent discrimination against people with pre-existing health conditions, provide millions of Americans with tax credits that help pay for coverage, and allow all Americans to shop and compare plans in a transparent marketplace.
Health insurers across the country are now in the process of submitting proposed individual market plan offerings and premiums for 2018 to state and federal regulators. These rate filings will contribute to the ongoing debate about health insurance affordability and the state of the ACA marketplaces. Here are a few key points to keep in mind.
The Marketplaces Were Poised for Greater Stability and Success
It's increasingly clear that the
For consumers, these improvements should translate into lower premium increases and more insurer competition. Consistent with that,
Proposed Rate Filings Instead Reflect
But instead of "business as usual," the
* Threatening to withhold billions of dollars owed to insurers. Under the ACA, insurers are required to offer plans with lower deductibles and copays ("cost-sharing reductions" or CSRs) to lower-income consumers; the government then reimburses them for the roughly
* Creating uncertainty about whether it will enforce the ACA's individual mandate. The individual mandate encourages healthy consumers to buy health insurance by requiring them to pay a penalty if they don't. But the Administration has intimated that it may stop enforcing the mandate. If insurers believe the mandate won't be enforced, they will raise premiums by up to 20 percent to cover the resulting increase in per-enrollee costs.
* Discontinuing outreach during one of the most critical weeks of open enrollment. In its first week in office, the Administration abruptly halted outreach and marketing activities for the final week of the 2017 open enrollment period. That decision likely led to tens or hundreds of thousands fewer sign-ups for 2017, especially among younger, healthier consumers, which will mean higher per-enrollee costs and premiums going forward.
* Finalizing rules that will cut tax credits and make it harder for people to sign up for coverage. Under new rules finalized in April, millions of consumers will likely receive less help paying for coverage, and the open enrollment period for 2018 will be shorter. These changes are likely to mean fewer sign-ups, also contributing to higher per-enrollee costs and premiums going forward.
In a recent analysis, actuaries at Oliver Wyman concluded that uncertainty about CSRs and the individual mandate will add 20 to 29 percent to rate increases for 2018 and that 2018 rate increases would be about two-thirds lower without these factors. In states where insurers have submitted two sets of proposed rate increases for 2018 -- with and without Trump Administration sabotage -- these rates are in line with the Oliver Wyman projections (see graph).
See graph here: http://www.cbpp.org/sites/default/files/styles/report_450px/public/atoms/files/6-21-17health-f1.png?itok=bnLl67je
Final Marketplace Options Will Depend on What Policymakers Do Next
Even more troubling, Trump Administration sabotage may lead some insurers to exit the ACA marketplaces altogether. Already,
In the ACA marketplaces' first four years, every consumer nationwide had options for marketplace coverage. To ensure that the same is true this year, policymakers must, at a minimum:
* Give insurers certainty that they will receive the cost-sharing reduction payments they're owed, as governors and insurance commissioners of both parties, insurers, providers, and the
* Commit to administering the law of the land. That means enforcing the ACA's individual mandate and undertaking the outreach needed to make sure consumers know about the coverage options available to them.
* Work with insurers and state insurance commissioners -- as the previous Administration did -- to facilitate insurer entry into new markets and make sure consumers everywhere in the country have options.
Provided There Are Marketplace Options, Most Consumers Will Be Protected
Fortunately, the ACA is designed to shield most consumers from the rate increases that could result from the Trump Administration's actions, as well as from normal increases due to health care cost growth. Consumers will be protected as long as the Administration's sabotage does not leave people in some parts of the country without marketplace options -- and as long as the ACA itself stays intact.
That's because, under the ACA, most marketplace consumers don't pay sticker price for their health coverage. Instead, more than 80 percent qualify for tax credits that are designed to keep coverage affordable for consumers no matter what headline premiums are. Specifically, people with incomes up to 400 percent of the federal poverty level -- about
This year, for example, headline premiums rose significantly, as insurers adjusted their premiums to make up for earlier underpricing. Even so, average premiums for the more than 80 percent of consumers with tax credits stayed exactly the same --
The House ACA Repeal Bill Would Dramatically Increase Marketplace Costs
Along with sabotage by the Administration, legislative efforts to repeal the ACA threaten marketplace consumers' access to affordable coverage.
Footnote:
1. For a version of this fact sheet with links to sources, see http://www.cbpp.org/research/health/the-state-of-the-aca-marketplaces-making-sense-of-individual-market-rate-filings.
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