How might the Patient Protection and Affordable Care Act (ACA) be affected by the incoming Trump administration? The new administration and the Republican Party are considering a number of policy ideas regarding ACA’s repeal, replacement, and reform. In this article, Milliman’s Scott Weltz, Fritz Busch, and Nick Krienke highlight key policy discussions to monitor that will have a significant impact on individual health insurers.
This is the first in a series of papers Milliman will publish as the country contemplates another round of healthcare reform. We have also compiled a reading list of relevant papers from our ongoing analysis of the ACA. To view that library, click here.
What patterns in plan design offerings have been seen in the marketplace during the first three years after the implementation of the Patient Protection and Affordable Care Act (ACA)? Individual market member projections exhibited a preference for lower-cost plans with health maintenance organization (HMO) plans and plans at the lower end of the allowable actuarial value (AV) range being the most popular. In contrast, small group membership projections shifted toward higher AV ranges within metallic tiers, which illustrates different preferences in the small group market.
By looking at trends in plan offerings, even at a macro level, insurers may be able to gain insight from emerging patterns in the market to help frame marketplace strategies in future years. Milliman’s Abigail Caldwell and Jordan Paulus offer more perspective in this paper.
The commercial health insurance markets in the United States in 2014 experienced a significant change relative to prior years. These changes were most dramatic in the individual health insurance market, with the conversion from medical underwriting to adjusted community rating in many states, as well as the implementation of the federal and state insurance marketplaces, facilitating premium assistance to many Americans who were previously uninsured. The 2014 edition of Milliman’s annual report on the commercial health insurance market provides an overview of financial results in the individual and group insurance markets. The report also focuses on enrollment changes in the individual market and the impact of the Patient Protection and Affordable Care Act of 2010’s (ACA) risk adjustment and risk corridor programs.
With the enactment of the Patient Protection and Affordable Care Act (ACA), health insurers have had to comply with several requirements. The insurer experience in 2013 reflects the third year insurers have been required to comply with federal minimum loss ratio requirements. This Healthcare Reform Briefing Paper by Milliman’s Paul Houchens, Jason Clarkson, and Colin Gray provides an overview of health insurer financial results in 2013.
Here is an excerpt from the report:
How have financial results changed since 2010?
With four years of insurer financials available, assessments of the ACA’s impact on insurer expense structure and profitability prior to the 2014 rating reforms can be made. Figure 2 provides the incremental change in costs from 2010 to 2013 for insurers reporting financial results during all years between 2010 and 2013. For example, in the individual market, earned premium PMPM has increased approximately $27 from 2010 to 2013.
Figure 2 indicates that premium increases in the group insurance markets tracked very closely with claims expense increases. However, in the individual health insurance market, growth in claims expenses outpaced premium growth by nearly $10 PMPM. This is the primary reason why the medical loss ratio percentage increased by 5.5% in the individual insurance market from 2010 to 2013, despite an increase in administrative expenses on a PMPM basis.
Figure 3 provides a visual representation of changes in each market’s financial structure from 2010 through 2013. Total administrative and claims expense are represented by the red shaded bars, while carrier earned premium is represented by the green outline surrounding the bars. As illustrated by this figure, the gap between earned premium and the sum of administrative and claims expenses has remained consistent in the group markets from 2010 through 2013, yet has been eliminated over the four-year period in the individual market.
With the Patient Protection and Affordable Care Act (ACA) enactment in March 2010, health insurers have had to comply with minimum loss ratio requirements, more stringent rate review, removal of annual benefit limits, first-dollar coverage of preventive care, and other requirements. While the largest reforms enacted by the ACA do not begin until January 1, 2014, for the individual and small group health insurance markets, there are now multiple years of insurer financial experience to evaluate how the ACA is impacting insurer’s profitability and expense structure.
This report uses data reported by health insurers in their Medical Loss Ratio Reporting Forms (MLR forms) submitted to the Center for Consumer Information and Insurance Oversight (CCIIO) in 2011 and 2012, along with 2010 Supplemental Health Exhibit (SHE) data, to summarize financial results in the commercial health insurance markets. The report provides an overview of health insurer financial results in 2012 and evaluates changes in the health insurance industry’s expense structure and profitability from 2010 to 2012, including changes in the medical loss ratio percentage.
President Obama’s November 14 announcement that health insurance issuers would be permitted—pending approval by state regulators—to renew certain canceled health insurance policies has raised new questions for the individual and small group marketplaces in 2014, just when many issuers were starting to turn their attention to strategies for 2015.1
At the time of this writing, much remains unclear about how states will react to the president’s proposed administrative fix. So far, Rhode Island, Vermont, Minnesota, and Washington have said they will not allow noncompliant policies to be renewed, while Florida, North Carolina, Ohio, Kentucky, Texas, and Oregon have said they will.2, 3, 4 Other states have said they need more time to decide, and it is still possible that legislative action will be taken on this issue.
For states that allow this transitional policy, a new category of exempted policies will be created, distinct from both the policies previously grandfathered in March 2010, and also the new reformed policies on and off the exchanges that comply with the full gamut of reforms taking effect in 2014.
I examine some of the questions and challenges posed by the transitional policy in my new article, “President Obama’s transitional policy for canceled plans.”