For a short time in October, the U.S. presidential race veered from the topic of email servers and recordings from Access Hollywood to focus on a substantial issue: rising premiums due to the Affordable Care Act. States will see an average of a 22 to 25% increase in premiums next year, with Arizona leading the pack thanks to an increase of 116%.
Insurance experts expected premiums to rise — thanks in part to climbing medical costs — but they didn’t expect increases of this magnitude, says Cynthia Cox, associate director of health and private insurance for the Kaiser Family Foundation.
“It was clear to many industry analysts that premiums would need to rise next year in part because insurers have been losing money in many cases, but also because there was a reinsurance program that was in effect in 2016 that is no longer going to be in effect in 2017,” says Cox.
Cox says rising medical costs drove up premiums from 5 to 10 percentage points, “but the remainder is likely due to mispricing. In many cases, the plans were priced too low.”
The premium increases were not the only piece of bad news surrounding the ACA. Earlier this year, insurance giant Aetna dropped out of supporting the health plan, bringing the total to five on the list of major carriers that will no longer participate in ACA.
Could other major carriers drop out of ACA? Cox is doubtful — for the time being at least. “By now, insurers have had to commit to whether they will participate in the coming year. There are still insurers that could drop out, depending on how they do financially, but what we are seeing now is probably the extent of the coming year,” Cox says.
An open enrollment to remember
Along with an election for control of the White House and both houses of Congress, this year’s open enrollment season is critical to the short-term fate of ACA. This open enrollment period could determine if more insurers drop out of ACA or any come back into the fold, according to Cox. “Insurers will be watching how many people sign up to healthcare.gov and on the exchanges as well. They are looking for signs if this market is stabilizing,” she says.
cIf insurers see enrollment increases, that will be a sign of stability that may encourage insurers to stay or to return if they have left. But the opposite could also happen, warns Cox. “If these open enrollment numbers decrease, it could be a sign that healthy people are leaving the market.”
This could have an impact on insurance brokers. Last year many insurers were starting to cut their commissions. “It could be happening even more this year, and that is always a big concern for brokers,” Cox says. “It’s a big concern for people signing up who need that person to navigate their options.”
Paul Hughes-Cromwick, co-director of the Center for Sustainable Health Spending and Altarum Institute, disagrees. “The impact will be small, as there are lots of competing forces here,” he says. “The vast majority of people who participate on the exchanges get large subsidies that are pegged to the costs of these policies.”
Therefore, as premiums rise, the subsidies rise, according to Hughes-Cromwick.
“One of the downsides [to the rising premiums] is that most participants are required to switch products, and no one likes to do that. People have the same kind of inertia,” Hughes-Cromwick says.
Critics of ACA charge that increasing premiums could mean fewer options for the insured. “I think what we're seeing is insurers across the board who are leaving markets. Obviously United was the first. Aetna and Humana are getting out of a number of markets, and so is Blue Cross,” says Joel White, president of the Center for Affordable Health Coverage.
“Last year, 187 counties had only one insurance plan. Next year's going to be somewhere around 285 so it's a huge increase—mostly in rural areas but also in one-third of urban areas,” White adds.
If this year’s open enrolment doesn’t go well, Cox expects there will be a call for legislative repairs to the ACA. Along with some on the right side of the political spectrum calling for a total repeal and some on the left calling for a single-payer system, a moderate fix may emerge that Cox says “leans more technical” in nature.
“Another idea is a ‘copper plan’ that allows for catastrophic coverage to more people. These are lower-level plan options that some find attractive, particularly younger, healthier people,” she says.
Migrating to exchanges
For the ACA to survive, more people have to be moved toward the exchanges. “This is a key point. This is a sizable population that is buying coverage off of exchanges, and they have every incentive to stop doing that. Some of them will get the message to participate on the exchanges as the only way that they can take advantage of the subsidies,” Hughes-Cromwick says.
The off-exchange market is going to be of keen interest to industry analysts and participants next year. “For the most part, people buying on the exchange are not going to be sheltered from premium increases, and then the people who are buying off of the exchange don't get subsidies,” Cox says.
“Even after shopping around, their premiums are 20%. How people going to react?” she asks. “Are they going to pay that increase? Are they going to see if they qualify for a subsidy by moving onto the exchange, or are they going to drop their coverage altogether?”
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