'We were off': A view of the ACA markets from a regulator's side
Earlier this week, Aetna, the nation's third largest insurer, announced late Monday evening it was leaving a not insignificant share of the ACA marketplaces on which it currently offers individual plans. In fact, it was a pretty big deal. CEO Mark Bertolini announced the carrier would stop selling on-exchange plans from 778 counties across 15 states to 242 counties in four states, nearly a 70% participation reduction. To borrow a phrase seldom used in healthcare news, then the internet exploded.
Not even 31 hours later after Aetna's announcement, The Huffington Post revealed the insurer in early July threatened to pull out of the ACA exchanges if the Obama administration attempted to block Aetna's pending merger with Humana. (The Justice Department did file a suit on July 21 against the merger. Twenty-six days later, Aetna made it's decision on ACA market participation). That's when the think pieces and the explainers really started picking up across the web.
Some noted Aetna's exit along with other major insurers retreating from the exchanges could put the idea of a public option in the national spotlight come election time this year. Others noted that narrower networks and "intimate knowledge" of regional markets help insurers earn money on the exchanges. Andy Slavitt, CMS acting administrator, went on a tweetstorm (aggregated by Politico's Dan Diamond) to share why he thought the market is attractive to insurers for the long haul. In short, Slavitt stated carriers know they need to meet new expectations in a business-to-consumer insurance market and plans need to build and create affordable options as well as customer relationships. Slavitt noted the Medicare Advantage and Medicare Part D markets took time to mature as well.
That'll cost you
However, a lot of insurers are currently losing money on the exchanges. Jake Sunderland, public information officer, at Oregon's Department of Consumer and Business Services (ODCBS), told Healthcare Dive the state’s seven largest insurers lost $171.6 million in 2015 across all lines of business, compared to a net loss of $46.7 million in 2014, and a gain in net income of $78 million in 2013.
While opinions about what Aetna's market exit means for greater health of the market were in no short supply this week, the truth is that if insurers don't want to participate in the markets, then no one -- including the federal administration -- can make them, as Bloomberg's Zachary Tracer noted.
The result of a few -- and in some cases one -- insurers offering plans in certain locations can lead to higher premiums. But overall, premiums are increasingly whether a region is a competitive market or not. For example, Oregon's final individual premium rates, one of the first states to release approved 2017 premium rates, range from an "average rate decrease of 8.9% to an average rate increase of 17%." Silver Standard Plan premiums -- the most popular plan in the exchanges -- for a 40-year-old in Portland would range from $266 to $362 a month, a prepared release noted.
Sunderland says something that can get lost in the shuffle of conversation over premiums is premium rates are directly related to the cost of healthcare services. Rates that are requested too low will sometimes be pushed up while some requested rates need to be lowered if they are not actuarially sound. "Our job is to make sure the rates are adequate as well as not excessive to find that sweet spot that allows companies to pay claims and they have a right to a small amount of profit though very few companies are making any money right now."
From a business participation standpoint, it's somewhat easy to understand why carriers losing money on the exchanges may want to recoup some earlier losses while keeping pace with the general, annual increase of healthcare costs. While the market may stabilize in the future, insurers currently eating the costs of upwards in the millions can't be judged too harshly for not playing into the long game.
"It doesn't do anyone good for companies to become insolvent in the middle of the year like we're experiencing now," Sunderland added.
Unfortunately, it's the patients and enrollees who suffer as a result of this situation. By Charles Gaba's estimates, 1.6 million individuals or so will need different policies next year. Those estimates are just for those with plans under Aetna, UnitedHealth and Humana; adding numbers from assorted co-ops/small carriers pushes the number up to 1.8 million.
Another part of the reason premiums are increasing next year is the overall greater visibility into the reality of the market. The rate review season for 2017 is the first year that insurers have a full year's worth of claims data under the exchanges. Before this year, premium rates were based on projections. Some to the reasons insurers are losing money on the exchange are because policyholders turned out to be sicker than expected and employers didn't offload their employees onto the exchanges as much as anticipated. "We were off," Sunderland told Healthcare Dive, adding that's not unique to Oregon's individual insurance landscape and he stands by the rate decisions made for the 2014 plan year. "It's proven to be a challenging environment as carriers are starting to finally get data on what to expect from this population."
One of the fears for the individual markets -- especially in rural areas -- is if and when all potential carriers cease to offer plans and an entire region's population is shut out of the ACA exchange due to a lack of anyone willing to provide them a plan. While a lone carrier in a market could raise premiums significantly (Blue Cross Blue Shield of Alabama -- the only major insurer on the state's ACA market -- proposed to raise individual premium rates on the ACA marketplace on average by 39%), not having access to an affordable care plan would be worse. Sunderland notes regulators do not have the authority to compel an insurer to stay in a market it doesn't want to participate in.
Next year, all counties in Oregon will have at least two carriers participating on and off the state's insurance marketplace. But that took some work. While Oregon is a competitive insurance market, some insurers were considering backing out of some of the rural areas of the state. “We are concerned about the shrinking number of options in certain areas of the state, and we asked insurance companies to reconsider their decisions to withdraw,” Patrick Allen, director of the ODCBS, said in a prepared statement. “This is a short-term solution to provide more options in 2017, but we need to focus on long-term solutions to stabilize the individual market.”
The insurers were allowed to adjust premium rates upwards because they were taking on more risk. However, now all Oregonians have options for marketplace plans.
Sunderland notes while regulators enforce -- not make -- policy, a priority for his department includes developing policy ideas to bring to state legislature, in order to make it more enticing for companies to participate statewide in Oregon. He adds his department in the past has had success with reinsurance programs to cover high-risk populations and children. "That's certainly something we are looking at and exploring as we look toward the future."
Changes already in the works
While there isn't a single magic bullet being provided, it is generally accepted that something's got to give somewhere to make the marketplace stabilize. CMS officials had recently alluded to policy coming down the line to help strengthen the markets. One action late Thursday signaled the agency is making moves to try and do just that. CMS released a public request for information seeking public comment on concerns that some providers may be employing patient-steering patient eligible for, or receiving, Medicare and/or Medicaid benefits into ACA-compliant individual market plans. Slavitt took to Twitter to make clear today's action is in line with a stronger marketplace for the future:
Let me be clear. We have tools to make sure the Marketplace is strong for the long-term and, like today's announcement, will use them.— Andy Slavitt (@ASlavitt) August 18, 2016
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