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.
Milliman has released its annual report on the commercial health insurance market’s financial results, which provides a clear picture of health insurers’ financial experience in a given year. The report, based on medical loss ratio data submitted to the Centers for Medicare and Medicaid Services (CMS) and released in the fall of 2016, provides a final accounting of insurers’ financial results after “3R” transfer payments have been completed. Today’s report details results for 2015, the second full year of implementation of the Patient Protection and Affordable Care Act (ACA). The report also summarizes estimated effectuated insurance marketplace enrollment through 2016 and corresponding federal expenditures on premium and cost-sharing assistance. As the United States approaches a potential new round of healthcare reform, Milliman’s report is a helpful tool in analyzing the effect of current ACA financial assistance components to consumers and the impact on the health insurance industry from the insurance marketplaces and “3R” programs.
Key takeaways from Milliman’s report include:
• Underwriting margins in the individual market deteriorated from a 6.0% earned premium loss in 2014 to a 9.6% loss in 2015. The 2015 underwriting losses were due in large part to the risk corridor program funding shortfall.
• With no funding currently scheduled, the cumulative risk corridor payment shortfall has reached $8.3 billion, with nearly 90% owed to insurers in the individual market.
• Since 2013, individual market enrollment has increased from 10.9 million to 17.5 million, driven by the introduction of the insurance marketplaces and associated premium assistance. Conversely, the fully insured small group enrollment has shrunk from 17.3 million to 14.7 million, which is attributable primarily to fewer small employers offering coverage.
• The insurance marketplaces continued to take on a greater role in the individual health insurance market, with 56% of estimated 2016 market-wide enrollment attributable to coverage purchased in the marketplaces, relative to only 36% in 2014.
• From 2014 to 2016, the percentage of individual market enrollees receiving premium assistance has increased from 31% to 47%. Similarly, enrollment in cost-sharing reduction plans is estimated to have increased from 21% to 32% of national individual market enrollment.
Milliman’s overview of financial results provides a comprehensive look at insurers’ financial experience as well as the number of Americans impacted by marketplace subsidies under the ACA. As new healthcare proposals are debated in Washington, we believe this report provides a valuable tool for policymakers and insurers looking to better understand how insurance markets may react to future regulatory and legislative changes.
To receive regular updates of Milliman’s healthcare reports, contact us at here.
In this article, Milliman consultants Jeremy Cunningham, Maureen Tressel Lewis, and Paul Houchens summarize new regulatory requirements for Medicaid encounter data from the final managed care rule. The authors also identify best practices for state Medicaid agencies and managed care entities in the development and submission of encounter data. Additionally, they discuss how improvements to the quality of Medicaid managed care encounter data may change the industry.
Join Milliman’s Jeremy Cunningham, Maureen Tressel Lewis, and Paul Houchens for the webinar “Medicaid encounter data standards” on Wednesday, June 1, at 12 pm EST. They will provide an overview of encounter data standards and the implications of the final Medicaid managed care rule for state Medicaid agencies and managed care entities. The webinar follows a paper published recently about encounter data standards. To register, click here.
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.
Sponsors of self-funded group health benefits may be able to reduce their healthcare expenditures by entering into a shared savings arrangement with an accountable care organization (ACO). In the latest issue of Milliman’s Benefits Perspectives, actuaries Anders Larson and Paul Houchens highlight some items that plan sponsors should consider regarding such an arrangement. The following is an excerpt from the article.
For plan sponsors determining whether a shared savings arrangement is appropriate, the following are some of the key factors to consider:
• Number of plan participants: For plan sponsors with fewer than 2,000 plan employee participants, independently developing a shared savings arrangement with an ACO may be problematic as the plan may experience significant claims volatility from year to year. Additionally, the plan sponsor may not have the necessary leverage in terms of healthcare service volume to garner favorable terms with the ACO. For plan sponsors with limited size, exploring a shared savings arrangement as part of a purchasing coalition or through an insurer may be beneficial; however, the outcome of the shared savings calculation might not be shared directly with individual plan sponsors.
• Geographic dispersion: ACOs generally have a localized geographic focus. Therefore, for employers with employees dispersed across the country, having an ACO manage the majority of the employee population may be an impossible task. For such employers, they should evaluate how their third-party administrators are building networks on a regional basis. A benchmarking exercise (discussed in the next section) will allow the plan sponsor to determine if its plan is well managed at a regional level. If the network is built with a focus on high-quality, cost-efficient care, the employer may capture the same financial benefits of a shared savings arrangement. Additionally, to the extent a private exchange could contract with ACOs on a regional or local level, the private exchange may offer purchasing power that could not be created independently by a plan sponsor.
• Current healthcare utilization and cost: A plan sponsor that already enjoys partnering with a high-performing provider delivery system may have little financial incentive to deviate from its current arrangement. Employers with predominantly young adult employees also are unlikely to have the same financial savings opportunity from better utilization management as employers with a significant portion of employees with high-risk chronic conditions. Employees with high-risk chronic conditions create a larger variance in potential costs for a plan sponsor, as well as management opportunities for an ACO. As one of the first steps in evaluating whether a shared savings arrangement may be beneficial, plan sponsors should have their healthcare utilization and costs benchmarked relative to expected costs for their participants’ demographics (including population health), plan designs, geographic location, and provider discount level. Such an analysis will identify utilization management opportunities for a shared savings arrangement.