The Patient Protection and Affordable Care Act (ACA) introduced many changes to the individual health insurance market beginning in calendar year (CY) 2014, including new rating rules and the introduction of federal financial assistance to purchase health insurance through the insurance marketplaces. It is important for state policymakers to understand the health and stability of the individual health insurance market and how the ACA has affected its health insurance consumers.
Milliman actuaries Paul Houchens, Jason Clarkson, and Zachary Fohl have prepared a profile of the individual health insurance market for each state along with the District of Columbia (DC). The profile summarizes insurer financials, marketplace enrollment, and federal assistance provided to households purchasing insurance coverage through the insurance marketplaces, incorporating recently released data from the 2017 open enrollment period.
The U.S. Supreme Court has handed down decisions on two significant cases that have direct or indirect implications for employer-sponsored retirement and healthcare benefit plans. This Client Action Bulletin summarizes these cases of interest for employers that sponsor such plans.
The U.S. Supreme Court’s recent decision to review the legality of the premium subsidies provision of the Patient Protection and Affordable Care Act (ACA) has major implications for the health insurance industry. In a new article, Milliman consultants Jason Siegel and Jason Karcher address several questions concerning the uncertainty the high court’s decision creates for insurers participating on the healthcare exchange.
Here is an excerpt:
How many people will use FFEs?
As mentioned earlier, APTCs are one of the major legs upon which the ACA stool stands. Individuals are required to maintain minimum essential coverage as long as it is affordable to them. Of those who enrolled in coverage through an FFE, 86% received these credits. Removal of these credits will likely reduce participation. A RAND Corporation study3 commissioned by the U.S. Department of Health and Human Services (HHS) estimates that this would decrease enrollment to 32% of what it would otherwise be. Impacts of decreased enrollment on economies of scale and volatility of claims experience should be considered when planning for 2016.
What will the morbidity of these individuals look like?
The removal of subsidies would encourage adverse selection, as there will be a tendency for the sicker of those who would otherwise receive subsidies to maintain coverage, while the healthier will tend to lapse. The same RAND Corporation study concluded that removal of the APTCs would result in a 43% increase in premiums in the individual market, which would primarily be due to the higher claims levels. Individual issuers should consider the extent to which these forces may impact their memberships and the memberships of their competitors when setting rates for 2016.
Will health plans still have sufficient incentives to participate in the exchange?
APTCs are only available to enrollees through the exchange, which has been a substantial incentive for insurers to offer their plans in the exchange market. In the absence of APTCs, the exchange user fee (3.5% of exchange premiums) may be too high relative to any remaining benefits of exchange participation. In recognition of this, the 2015 FFE contracts with health plans include a clause that these contracts may be terminated by the health plan4 in the event that APTCs are no longer available, subject to state and federal law. However, doing so may engender bad will from members who signed up through the exchange and enjoy the transparency it creates. This should be taken into account when considering exchange participation for 2016 and beyond.
To read the entire article, click here.
As we move into April, health plans are working toward impending deadlines to complete rate filings for insurance products that will be available next year on state health exchanges. Last week we saw the release of two notable public analyses of premium impacts—a 50-state report from the Society of Actuaries, and a Milliman analysis for the California exchange, Covered California—and there are probably more estimates coming soon as the healthcare industry and the nation look to better understand the cost implications of the Patient Protection and Affordable Care Act (ACA).
Even though public debate has been wrestling with reform topics for three years now, there continues to be confusion over the interaction between insurance premiums and federal subsidies for lower-income individuals.
The common mistake here is that, while subsidies may reduce the amount that a lower-income individual has to pay directly for health insurance, they do not affect the actual premium. If a monthly premium for an individual policy in California is $450, a federal subsidy of $392.50 would reduce an individual’s cost to a manageable $57.50. But this is different from reducing the premium. The premium remains $450, with or without the subsidy. Here’s an illustration of this idea:
This distinction is important because premiums reflect the underlying cost of care. We cannot reduce premiums without reducing the underlying cost of care. Subsidies help make increasing premiums more affordable for lower-income consumers, but they do not actually reduce premiums. Someone still has to pay the full premium in order for the health plan to remain solvent. If the public is to better understand healthcare costs, it also needs to understand this distinction, because it is that underlying cost of care that is driving health insurance rates upward.
For a better sense of how the underlying cost of care affects premiums, read this paper. The Milliman Medical Index is also a useful reference in understanding this concept as are the videos in Milliman’s “Understanding Healthcare Costs” video series.