Legislation & Regulation

Back From the Dead. ACA Exchange Market Looking Healthy, Hale, and Competitive

But why? Trump administration wants credit for turnaround, but another take says it happened despite, not because of, the administration’s policies.

Richard Mark Kirkner
Contributing Editor

With everything the Trump administration has done to alter—some would say undermine—the individual health insurance market by rewriting ACA regulations, the predictions of moderate increases—even decreases—in 2019 premiums seem nothing short of miraculous. Same goes for more insurers jumping into the market.

But it may not be magic as much as the insurance cycle and market forces reacting to anticipated and past events. The consulting firm Avalere Health came out with a state-by-state report that projects premium increases averaging 3.1% next year, about a tenth what they were for this year. HHS Secretary Alex Azar went even further, saying that premiums for benchmark plans would actually decrease 2% next year. Avalere projected 12 states will see premiums decline and 19 will see new plans or expansion by existing plans.

Chris Sloan

Centene and Molina are applyng lessons learned from Medicaid managed care to the ACA markets, says Avalere’s Chris Sloan.

One conclusion that Chris Sloan, one of the co-authors of the Avalere report, draws is that because 2018 increases were so high, insurers had a lot of wiggle room for setting 2019 rates. Another conclusion: This is all happening despite what the Trump administration has done to alter the individual insurance marketplace—although Azar gave credit to his boss.

Someone must be wrong. Because an author of a consulting company’s report is easier to get on the phone than the secretary of HHS, we’ve deferred to Avalere’s Sloan to drill down into the outlook for the individual market as the truncated 45-day enrollment period proceeds.

Uncertainty was priced in

The story of 2019 rates was largely written when plans set their rates for this year. “When we just focus on the increase, we somewhat miss the point that premiums are a combination of all of the past few years of premium increases,” Sloan says. “Really, what happened last year were substantial premium spikes due to a couple of things, one of which was the market had gone through a year of reduced enrollment and reduced participation, so there was just general market volatility.”

That wasn’t the entire picture. In the last quarter of 2017, the Trump administration cut off the ACA’s cost-sharing reduction (CSR) payments—the government subsidies to cover out-of-pocket costs for lower-income people in silver plans. Insurers used that to justify their 2018 rates. The legal landscape for CSRs is murky. In September, a federal judge ordered the government to make a $5 million CSR payment to Montana Health Co-Op. Other lawsuits over CSRs are pending. Earlier this year, a federal court dismissed a lawsuit 18 states had filed to restore the payments.

In setting 2018 rates, insurers also anticipated—correctly as it turns out—the administration’s decision to allow short-term plans and association health plans, along with the impact that cutting the enrollment period from 90 to 45 days and rolling back the individual mandate would have on signups. “I think what we’re seeing is that health plans have largely priced in uncertainty and volatility already,” Sloan says.

The brighter outlook for 2019 is also what happens when the learning curve starts to flatten out. Remember, this market has only existed for five years. “This was a new market in 2014,” Sloan says. “It is a high-risk population skewed toward low income and individuals with chronic health conditions who are purchasing the guaranteed issue coverage.”

On the surface the repeal of the individual mandate might seem like a big blow, but Sloan notes that the mandate itself never functioned as intended. “It’s a market where the individual mandate did not have a dramatic effect on driving in young, healthy, unsubsidized people,” he says. Insurers have reacted predictably, pulling plans out of selected regions since 2015.

This year, they’re reversing course. For the first time since 2015, some states expect to see more plans jumping in. “It really looks like that piece of it has been somewhat solved in 2019—how health plans figured out to price this market,” Sloan says.

Another sign that health plans are figuring out the exchanges: margins over the past six months have exceeded even pre-ACA levels, according to a Kaiser Family Foundation analysis. Loss ratios, which began to decline in 2016, reached new lows in the second quarter of 2018—even despite the CSR cuts. “This suggests insurers were able to build the loss of payments into their premiums, and some insurers may have even over-corrected,” the report states.

All over the map

It’s not true of all markets, but when it comes to the individual insurance market, more competition does mean some competition on price. Avalere analyzed the new plans and found three companies carrying the load: Oscar Health, which was started in 2014 to explicitly cater to the individual exchange market; Centene; and Molina. Oscar is expanding into Florida, Michigan, and Arizona next year and adding metro areas in Ohio, Tennessee, and Texas. Centene announced last month that it would start selling ACA plans in four new states (North Carolina, Pennsylvania, South Carolina, and Tennessee) and expand into new counties in six others (Florida, Georgia, Indiana, Kansas, Missouri, and Texas). Molina is returning to Wisconsin and Utah, and Anthem is reportedly hopping back into the Maine market after pulling out last year. And carriers are getting into new markets within states; for example, in Pennsylvania, Geisinger is expanding into Philadelphia after Independence Blue Cross had that market to itself.

Sloan says Centene and Molina are taking what they’ve learned in the Medicaid managed care market and applying that to exchange plans: “It’s a similar type of population in the individual market.”

Avalere’s state-by-state analysis shows projected rates for 2019 are all over the map, ranging from a 18.8% increase in Washington state (despite new plans) to a reduction of 15.1% in New Hampshire. States like Oklahoma and Wyoming—not exactly ACA-friendly territory—are seeing declines in premiums. Reasons for the increases in some states and decreases in others are similarly all over the map. In Oklahoma, for example, Sloan says, plans “probably overshot” their projections for this year and are making a correction for 2019. State-level reinsurance programs have had a major effect. Minnesota, Wisconsin, New Jersey, Maine, and Maryland all started reinsurance programs in the past year—and they’re looking at premium decreases of between 3.5% and 13%. “Reinsurance programs really work,” Sloan says.

In Tennessee, it’s a different story. It didn’t adopt a reinsurance program and in 2018 had regions at risk of not having any exchange plans. Sloan says the insurance department there has worked hard to attract new insurers—they include Bright Health and Centene’s Am­better plans—and that Cigna and Oscar, which entered Tennessee last year, are expanding to new markets.

It was no accident that Azar went to Tennessee in September to brag about the Trump administration’s actions that stabilized the individual exchange market, among them the elimination of CSR payments and approval of state waivers for reinsurance. “It turns out, when you have a president who’s willing to take decisive action, who understands business, who’s willing to work with the private sector, you can find a way to help American patients, even within a failed system like the ACA,” Azar told the Nashville Health Council.

That view is not universally held. The Kaiser report notes that if not for the Trump administration’s policy changes, “it is possible that premiums on average could be flat or even decreasing in 2019.” Sloan says the market is obviously plateauing despite policy changes. “We can never really know the extent of the impact that these decisions are having on what the actuaries are calculating for each of these health plans, but the health plans themselves are saying that the changes the administration has made are having an impact and that their rates would be lower without those changes.”

And don’t even try to use this to predict what will happen in 2020. “These effects are for 2019,” Sloan says. “We don’t have the information right now to say that the market is going to continue like this in coming years.”

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