On June 22, the U.S. Senate released its draft of a bill to amend portions of the Patient Protection and Affordable Care Act (ACA), called the Better Care Reconciliation Act (BCRA). The State Stability and Innovation Program (SSIP), part of the BCRA, is a grant program that provides funds directly to insurers as well as to states with the primary goal to stabilize and support the individual market. The SSIP is composed of two distinct parts. The first provides funds for short-term market stabilization programs that will go directly to insurance carriers in the first four years of the program. The second provides funds for the “Long-term SSIP,” which will be allocated to states starting in 2019 to fund various programs.
This paper by Milliman’s Thomas Murawski discusses elements of the SSIP and outlines the details from the draft bill released on June 22.
How much does your state benefit from Patient Protection and Affordable Care Act (ACA) subsidies?
Milliman’s recently published 50-state profile of the individual health insurance market presents nationwide enrollment and subsidy data that can help states better understand the funding and coverage requirements under the ACA. The infographic below sheds light on some of the 2017 results, including marketplace enrollment numbers by state, and a closer look at the ACA cost-sharing reduction (CSR) subsidies—for which government funding is currently under legal challenge.
Commercial health issuers should develop contingency plans as legislative proposals designed to modify the Patient Protection and Affordable Care Act (ACA) emerge. While the direction of the ACA marketplace is uncertain now, health plans can proactively evaluate the risks and rewards of various contingency plans to act quickly once the new market environment becomes clear.
Milliman actuaries Amy Giese and Alison Fasching have authored a new paper offering issuers considerations for commercial contingency planning. In the paper, the authors explore the following new “three Rs” to mitigate risk in the current environment:
• Remain in the market
• Refile in the summer if changes occur after products are initially filed
• Remove products from the market
To learn more about the developing healthcare landscape in the United States, follow Milliman Healthcare reform 2.0.
Many insurers are contemplating the financial implications that a U.S. Supreme Court ruling against federal healthcare subsidies would have on their business. This Wall Street Journal article (subscription required) quotes Milliman’s Tom Snook discussing a potential exodus from the federal exchange if tax credits are rescinded.
Here is an excerpt from the article:
Insurers offering products in the federal-exchange states are worried that they could be caught short this year. An antisubsidy ruling could potentially take effect—and prompt consumers to drop coverage—as soon as this summer. Insurers are locked into rates for 2015 and typically wouldn’t be able to raise prices midyear. And partly because of state regulations, it isn’t clear if or when insurers would be able to withdraw from the federal marketplace before January.
But for 2016, if the federal insurance tax credits are unavailable in a state, “the impact would be substantial enough that I would expect many carriers to consider pulling from the market,” says Tom Snook, an actuary with consultants Milliman Inc. who is working with a number of insurers offering exchange plans. “There’s a question, if the subsidies are struck down, if it’s an insurable market.” That could leave consumers with fewer, and far pricier, choices.
Under the Patient Protection and Affordable Care Act (ACA) enrollees who qualify for subsidies are allowed a 90-day premium nonpayment grace period so long as they have paid their first month’s premium. This provision could have adverse effects for the healthcare industry if individuals only pay nine months of premiums for a year’s worth of coverage.
A recent Health Affairs article by Milliman consultant Hans Leida and Manatt’s Michael Kolber offers perspective on how premium rates and exchange participation may be affected by individuals who game the grace period provision.
It is unclear how many individuals are likely to take advantage of this loophole. It seems likely that CMS’s new approach for the federally facilitated exchanges will reduce the number of gamers in those markets somewhat. In states that do not adopt CMS’s approach (or some other method to reduce gaming), the impact will likely be greater.
However, it is also likely that the impact will be smaller in the first years of the exchanges. Many of those newly enrolled through the exchanges are unfamiliar with health insurance in general and the ACA’s arcane rules in particular, and may not realize the potential for gaming. Others may have objections to gaming the system, or may be averse to the perceived risk of being in a grace period.
On the other hand, given the significant potential cost savings for gamers, it seems plausible that—eventually—many low-income individuals will adopt this strategy in order to further reduce their premium costs. For example, the nationwide average monthly premium for the second lowest cost silver plan is approximately $260 for a 35 year old. At that rate, a single enrollee at 250 percent of the federal poverty level would have a monthly net premium of approximately $193 after subsidy.
Over three months, this would amount to $579 of net premium that could be avoided through gaming. The insurer in this case would receive only $67 (the subsidy in the first month) out of the total gross premium of $780…
If even a relatively small fraction chooses to do so, it could have real consequences for premium rates—perhaps requiring an increase of up to several percentage points. Insurers with a greater concentration of subsidy-eligible enrollees, including new market entrants such as consumer operated and oriented plans (CO-OPs) and traditional Medicaid managed care organizations, could see larger impacts.
To read the entire article, click here.
Policyholders may receive a lower advanced federal subsidy than they otherwise would if they fail to visit the federal health insurance exchange to reenroll or update their financial information, resulting in higher out-of-pocket costs. Milliman actuary Paul Houchens discussed the auto-enrollment process with Trudy Lieberman, and explains how premium trends affect subsidies and out-of-pocket costs in this Rural Health News article.
The actuarial consulting firm Milliman has found that even small premium increases – in the 5 percent range – can lead to out-of-pocket increases of between 30 and 100 percent for those with low incomes if income information is not updated. Data suggest that most individuals with exchange policies have incomes of $25,000 or less and most families have incomes around $50,000, said Paul Houchens, an actuary with Milliman.
Houchens told me several reasons premiums will be higher this year for many exchange buyers. (Some will see decreases.) Insurers, which offered super low rates in the exchanges last year to entice more customers to their plans, are finding they need to increase their premiums. And in many parts of the country the benchmark plan (the second lowest cost silver level policy) on which subsidies are based has changed, meaning higher premiums for some people.
Premiums also go up each year gradually each year you get older. Because the Affordable Care Act allows insurers to charge older people three times more than younger ones, older people will certainly feel the pinch if last year’s subsidy is too low. They might get larger subsidies if they reapply.
This paper provides more perspective on the potential implications for policyholders and insurance companies related to changes in federal subsidies and the renewal process.