Threats, actions and inactions from Washington, D.C., have left the Affordable Care Act (ACA) exchanges teetering and insurance companies fleeing the individual market for 2018. This state of affairs can be harmful for payers, who are sometimes unable to share population risk with other insurers. It's also an issue for providers, who will see fewer people with coverage and will lose leverage in payer negotiations on reimbursement and provider networks.
The effects of an uncertain individual market are already showing in premium rate hikes, but 2019 will likely be even more troublesome — unless there are policy changes.
Congress has failed to pass major healthcare legislation this year, and critics charge the executive branch has been undermining the exchanges, including:
President Donald Trump has ended cost-sharing reduction (CSR) payments to insurers. CSR payments help keep down out-of-pocket costs for lower-income Americans.
The Trump administration may not enforce the individual mandate. This would lead to fewer members and cause younger, healthier people to leave the exchanges. The result would be an imbalanced risk pool with not enough healthy people to offset the sickest members.
The administration cut the open enrollment period for ACA plans in half this year, slashed its advertising budget by 90% and moved healthcare.gov offline on Sundays, which is when many working people may try to sign up for an ACA plan. These moves could reduce ACA plan membership.
These actions and threats have resulted in some payers exiting the ACA exchanges or proposing more than 20% premium increases.
“Insurance markets work best when there’s stability and when everyone has a pretty good sense of how the market is going to operate. Sadly, we’re not there right now,” Ken Wood, senior vice president of health plan development at Evolent Health, told Healthcare Dive.
During her time at HHS, Chiquita Brooks-LaSure, a managing director at Manatt Health, saw firsthand how much insurers worry about uncertainty. As director of policy coverage at HHS during President Barack Obama's administration, Brooks-LaSure was there at the start of the ACA exchanges. She recalled how insurers’ No. 1 concern was uncertainty.
Brooks-LaSure told Healthcare Dive insurers care less about specific rules and regulations than not knowing what to expect. They can price bad risk and design products when they know the market.
“Uncertainty has caused a lot of insurers to say (the exchanges are) too volatile,” said Brooks-LaSure.
Only one ACA payer in nearly half of counties in 2018
The ACA market uncertainty almost resulted in counties without any options in the exchanges. Major payers like UnitedHealth Group, Aetna, Humana and Anthem pulled back or completely out of the exchanges for 2018, which left state insurance commissioners scrambling to fill the gaps.
Nevada, Ohio, Missouri, Indiana, Virginia, Tennessee, Washington and Wisconsin all feared that they would have counties with no ACA payers in 2018. Ultimately, state officials and payers were able to get all counties covered. However, nearly half of counties will have only one ACA plan option in 2018, which is far from ideal for payers, providers and members.
Entire states like Kentucky, Oklahoma, Iowa, Nebraska, South Carolina, Mississippi and Wyoming will have only one payer for the entire state. Other states like North Carolina, Georgia, Tennessee, Alabama and Arizona will have most counties with only one payer.
Counties with only one payer option are mostly rural areas. Higher population areas mostly have multiple payers competing for business. For instance, Texas has four or more ACA payers in metro areas like Dallas-Fort Worth and Houston, while the more rural areas have only one or two ACA payers.
Having only one payer doesn't provide members any choice, leads to higher health costs and gives insurers more leverage over physicians and hospitals. Chris Sloan, senior manager at Avalere, told Healthcare Dive that payers can pretty much say “we want to pay X or you’re not in the network.”
Brooks-LaSure said those insurers also can set prices, provider networks and cost-sharing structures without any competition.
“States don’t have a lot of leverage if there’s only one insurer,” she said. “(The payer) has no incentive to try to compete better because they’re not competing against anyone.”
What does having only one ACA payer mean for hospitals and providers?
Payer contracts are likely already signed for 2018, so reimbursements won’t be affected in the counties with only one ACA payer next year. That impact may come in 2019.
This lack of competition will mean higher premiums. Sloan said Avalere’s research found that premiums are higher with lower competition. Places with one insurer had about 10% lower premiums than those with two and 15% less than places with three or more carriers.
There are three major concerns for hospitals in areas with only one ACA payer:
Out-of-pocket costs could increase. Higher out-of-pocket costs, especially in high-deductible health plans, may result in more bad debt for providers.
Narrower networks may nudge members toward HMOs, which will affect doctors not in those networks.
Decreased ACA plan enrollment will result in people using the emergency room for non-urgent healthcare. If this happens, hospitals will see more bad debt and uncompensated care because of fewer insured Americans.
To prepare for 2018, Sloan suggested hospitals in lone ACA insurer areas review their patient population. Find out the percentage of patients in ACA plans. Think about what would happen if say 10% of those patients drop out of the plans in 2018. Then, determine whether you need to set aside more money for charity care next year.
Wood said providers can also help patients who lose their insurer and need to choose a new plan. “I think the most important thing that hospitals and physicians can do is get the word out for people to get coverage,” Wood said.
Sloan suggested another way to help is for providers to advertise open enrollment in their waiting rooms. Having those patients insured is not only important for their health, but providers’ bottom lines.
What will this mean for payers?
Being the only game in town isn't exactly great news for insurers either. Sure, they get all the business, but that’s not a positive. There’s a reason the other payers pulled out of the counties.
“There is clearly a reason why plans didn't want to stay in those counties. There are clearly risk issues,” Sloan said.
Without any competition, the insurance companies don’t have another payer in which to share the risk. This means the remaining insurer will need to find ways to balance the risk and figure out how to reach profitability.
Given the increasing costs and reduced outreach and open enrollment period, insurers will likely see fewer members enrolled in ACA plans next year. Sicker members will remain in the plans. This will lead to higher premiums and out-of-pocket costs, which in turn may make more people leave the ACA plans.
Payers in rural areas especially will need to work on getting enough healthier members to offset those who need the most care, Wood said. Those insurers may also need more innovation, such as using telehealth, to help keep down costs.
“If you’re in a rural area and you’re the only health plan, you’re just hoping for an adequate mix of enrollment,” Wood said.
Sloan will closely watch how the only insurers in counties perform in 2018. He’s especially interested to see if they can manage risk and price plans correctly for the patient population.
“It’s going to be interesting how these health plans do,” Sloan said.
How will payers perform in 2018?
Sloan said one reason some of the larger payers pulled out the ACA exchanges is they’re publicly traded, and need to explain to shareholders why they’re losing money in the exchanges. The Blues, on the other hand, are nonprofit and have a mission to serve the individual market. Sloan said Blues plans cover about 90% of counties with only one payer in 2017.
“The Blues are holding up the market,” he said.
The Blues were in the individual market well before the ACA. So, while insurers with limited individual experience have pulled out of the ACA exchanges, the Blues continue to largely stay in the exchanges except for Anthem, a Blues plan that pulled out of nine of 13 exchanges for 2018.
“The Blues have been in this market and, in general, have been interested in making it work,” Brooks-LaSure said.
Beyond the Blues, another insurer to watch is Centene, which is expanding its ACA plan footprint. The St. Louis-based payer is growing ACA plan coverage in six states and entering three new ones (Kansas, Nevada and Missouri).
Centene has experience in Medicaid managed care plans. Those plans are closer to the ACA plan population than employer-based plans, so that could be a reason company officials spoke positively about their experience in the ACA market. Centene, which has 1.2 million ACA plan members, announced earlier this year it saw 69% growth in the first quarter of the year.
What about 2019?
Will more insurance companies drop out of the ACA exchanges for 2019? A lot can change over a year — or even over a week given the current political climate. Predicting the future is difficult when everything keeps changing.
However, health insurance experts agree that unless Congress passes legislation to provide CSRs — and take the decision out of the hands of the president — more payers will leave in 2019 and members' costs will continue to skyrocket.
This scenario would lead to counties with no ACA plan options in 2019, more counties with only one payer, difficult negotiations with payers, higher costs for members and likely more bad debt for providers.
One possible solution may come from the states. States are seeking their own reinsurance programs, which helps insurers manage risk. Brooks-LaSure said states could create reinsurance programs to help balance the market.
Ultimately, however, she would prefer a federal solution. “A national reinsurance program would be great. I’m not sure if it’s feasible now,” she said.