Tag Archives: Erik Huth

Is a death spiral likely in the ACA marketplace?

Starting in 2017, there has been talk of the possibility of a death spiral in the individual Patient Protection and Affordable Care Act (ACA) marketplace. Talk of an ACA death spiral occurred because two of the death spiral symptoms—high rate increases and falling enrollment—were observed in 2017 and 2018.

In health insurance, death spirals occur when premium rates rise enough to drive out the healthiest enrollees, leaving the risk pool sicker and more expensive. This, in turn, necessitates that insurers increase premium rates, which then drives out the next-healthiest enrollees and reduces new enrollment. This cycle continues until the risk pool contains only the sickest and most expensive enrollees, with premiums unaffordable for most. Death spirals start slowly and then accelerate, with the primary symptoms being higher than usual rate increases, falling enrollment, and increasing morbidity. In this paper, Milliman’s Erik Huth and Peter Fielek reviewed ACA rate changes, enrollment, and morbidity to determine the likelihood of a death spiral occurring in the ACA marketplace.

What effect will the final rule on short-term/limited-duration insurance have on insurance markets?

The final short-term/limited duration insurance (STLDI) rule represents the second step in the Trump administration’s plan to enhance healthcare choice and competition in America. As with the proposed rule, the final rule is relatively straightforward. Under the final STLDI rule, any plan that meets the following criteria is an STLDI policy:

1. The initial policy term is less than one year in duration.
2. The total policy term including any renewals can be no longer than 36 months.
3. The policy comes with a prescribed consumer warning indicating the limitations of STLDI policies.

By allowing renewals (at the enrollee’s discretion) in addition to extensions (at the issuer’s discretion), the final rule offers new flexibility to allow STLDI contracts to continue past the one-year mark. The final rule affirms the rights of states to add their own restrictions and controls on the market. The rule makes equally clear that the U.S. Department of Health and Human Services (HHS) does not intend to put any limits on states’ efforts to place further restrictions on STLDI.

States have the ability to shorten the initial term of STLDI policies, shorten the overall maximum length of the total STLDI policy terms, and determine whether STLDI policies can be extended, renewed, or neither. Each state’s legislative and regulatory responses to these three STLDI options will help shape their future individual health insurance markets.

To read more analysis regarding the provisions of the final rule and the potential implications to individual insurance markets, read this brief by Erik Huth and Jason Karcher.

Law and Executive Order: A look at how President Trump’s executive order on healthcare impacts the ACA’s small group and individual markets

The Presidential Executive Order Promoting Healthcare Choice and Competition Across the United States, signed by President Trump on October 12, could have a significant effect on both the individual and small group health insurance markets. The extent of any impact on either market will vary depending on how the executive order is interpreted and implemented by administrative agencies as well as whether those interpretations hold up to legal challenges.

This article by Milliman consultants Fritz Busch, Erik Huth, Nicholas Krienke, and Jason Karcher summarizes the executive order and analyzes key considerations and potential impacts for commercial health plans.

Transitional policies result in higher medical loss ratios

A new Milliman analysis shows that the percentage of transitional policy members in a state’s health exchange market appears to correlate with higher medical loss ratios. In the analysis, Milliman consultants Erik Huth and Jason Karcher quantify the effect that transitional policies had on issuers’ 2014 individual market performances and how it may result in 2017 rate increases for transitional states.

Here’s an excerpt:

The table in Figure 3 shows that issuers in transitional states had higher 2014 loss ratios but appear to not have taken large enough 2015 and 2016 rate increases to achieve profitable 2016 loss ratios (assuming 2014 to 2016 significant cost savings are not realized in other ways). Although issuers’ 2017 rate increases will reflect their 2015 experience and updated projections, there is potential for transitional states to see higher rate increases in 2017.

Figure 3

The graph in Figure 4 shows the 2014 ACA loss ratio and the average 2014 to 2016 statewide QHP base rate change for each state. The gray line represents an illustrative 2014 to 2016 rate increase needed to target an 85% 2016 loss ratio given the 2014 loss ratio and assuming a 5% annual claim trend. For example, a state with an 85% 2014 loss ratio would require a 10.25% 2014 to 2016 rate increase to target an 85% 2016 loss ratio (i.e., 5% annual rate increases to cover the 5% annual claim trend to maintain the 85% loss ratio). States well underneath the line indicate a possible need for higher 2017 increases than states closer to the line. Keep in mind that projected 2016 loss ratios are merely illustrative. There are many factors that will affect a state’s overall 2016 loss ratio and required 2016 and 2017 rate increases, such as, but not limited to, changes in experience and statewide morbidity levels, wear-off of pent-up demand, provider contracting, claim trends, population migration and characteristics, and product and issuer mix. These values also represent a statewide composite, while specific issuers could have materially different results than the average.

Figure 4