Cracks Are Starting to Show in Affordable Care Act’s Insurance Exchanges

UnitedHealth Group could lose $475 million

Health insurance exchanges created to help millions of people find coverage are turning into money-losing ventures for many insurers, according to an Associated Press report posted on the Medical Xpress website.

For example, the nation’s largest insurer, UnitedHealth Group Inc., could lose as much as $475 million on its exchange business this year and may not participate in 2017. Another major insurer, Aetna, has questioned the viability of the exchanges. And a dozen nonprofit insurance cooperatives created by the Patient Protection and Affordable Care Act (PPACA) have already closed, forcing approximately 750,000 people to find new plans.

More insurer defections would lead to fewer coverage choices on the exchanges and could eventually undermine the law, according to the report.

On the other hand, enrollment is growing and appears to be getting younger in some markets––a crucial factor for stability. Insurers also are learning more about their new customers and are adjusting their coverage to do better financially. The survival of the exchanges depends on whether those improvements continue and some other major worries diminish.

The biggest problem with the exchanges reflects a basic insurance rule: insurers need healthy, premium-paying customers to balance claims they cover from the sick, the report says. Insurers have struggled in many markets because people who couldn’t get coverage previously because of a pre-existing condition were among the first to sign up when the exchanges opened a few years ago. Healthy customers have been slower to enroll.

Insurers say they’ve also been hurt by customers who appear to be waiting until they become sick to buy coverage. The companies blame liberal enforcement of the PPACA’s special enrollment exceptions.

The law provides an annual enrollment window for several weeks starting in the fall. This is the main chance most people have to enroll or change coverage. But customers can enroll outside that window if their insurance needs change because they’ve moved, gotten married, or had a child, among other exemptions. Exchanges have not been asking for birth certificates, marriage licenses, or other proof of these life-changing events, leaving insurers vulnerable.

Many insurers also are struggling with higher-than-expected costs in general, according to the report. Part of that comes from either starting an insurance business from scratch, as the co-ops did, or breaking into a new market. For example, medical costs almost tripled to more than $181 million through the first nine months of 2015 for Maine Community Health Options.

Challenges remain for companies selling coverage on the exchanges, the report adds. Some government programs that provided temporary financial support for insurers as they set up their exchange business are winding down. At the same time, premiums are rising in many markets, and that makes the high-deductible coverage found in many exchange plans a tough sell for healthy people.

Insurers aren’t entirely anxious to dump exchange coverage, however. They will continue to shuffle in and out of the exchanges for a few years, predicted Larry Levitt, a senior vice president for the Kaiser Family Foundation. But, ultimately, he expects them to keep supporting this still-new business opportunity, which also is important to customers because the exchanges offer income-based tax credits to help buy coverage.

Source: Medical Xpress; February 26, 2016.