The ACA at 6 Years: Solid Progress but Cost Issues Remain

flying cadeuciiThe Obama Administration this month released final numbers on enrollment for the 2016 coverage year in the health insurance exchanges, as well as overall statistics on coverage gains to date under the Affordable Care Act (ACA).

The numbers emerge as the ACA turns 6 years old this week—on March 23. They were also released just as House Republicans issued their proposed 2017 federal budget. That budget, once again—you guessed it—repeals the ACA. The Republican budget is a counter to the Administration’s budget proposed in February. The release of both triggers the annual bruising battle over funding of the federal government, which again this year could end in prolonged stalemate.

You could be cynical or blasé about the Republicans’ persistent mission to kill the ACA—that is, if you don’t support that mission. But I think this piece of political theater continues to warrant contempt. Why? Because even if a Republican were elected President in November, the law is now technically impossible to gut completely. And Republicans know it.

There are a host of reasons the law cannot be nixed in its entirety, and these deserve more attention and discussion, on THCB and elsewhere, at a later time. In the context of this blog, I’ll just point out the obvious: it would simply be unacceptable (and political suicide) to strip 15 to 20 million people of their coverage. In addition, realistically, any insurance scheme to replace Obamacare would very likely be structured in a similar way—through private-sector insurance companies and plans operating in a regulated marketplace for people without employer-sponsored coverage. That’s why Republicans rarely talk about alternatives to Obamacare in any detail.

But I digress—more about all that if a Republican does become president and Republicans gain a larger majority in the Senate in this year’s elections.

Here’s a quick rundown of the latest enrollment and coverage numbers. Should you want details from HHS, they are here.

* 12.7 million people are now enrolled in an exchange plan (9.6 million in the 38 states where the exchanges are run by the federal government,via Healthcare.gov, and 3.1 million in the 12 states that run their own exchanges).

* 4.9 million people are new enrollees and 7.8 million who had exchange coverage in 2015 re-enrolled (numbers include individual enrollees and, in family plans, their dependents).

* 3.5 million enrollees are 18 to 34 years old, 28% of total enrollment, about the same proportion as in 2015.

* 10.5 million of the 12.7 million enrollees (83%) qualified for a subsidy (tax credit) to help them buy coverage.

* For enrollees in the 38 states the federal government runs, the average subsidy was $290 per person per month.

* For individuals buying coverage just for themselves via Healthcare.gov the average monthly premium, after the subsidy, was $106.

* About 4 million of the 7.8 million people who reenrolled switched to a different plan than they had in 2015—a positive sign that people got the message to shop for better deals.  Their average savings, if they stayed at the same “metal level” of coverage: $40 per month.

* Overall, to date, 20 million previously uninsured people have gained coverage under the ACA—17.7 million through the exchanges and Medicaid expansion in 32 states plus the District of Columbia, and 2.3 million young adults aged 19 to 25 who were able to stay on their parent’s policy until age 26.

* That 20 million gain in coverage translates into a 43% decline, from 2013 to early 2016, in the uninsured rate among people under age 65.  In turn, that brings the uninsured rate among non-elderly people down to around 11% from 20% in 2012-13.

* As of September 2015, the overall uninsured rate in the nation was around 9%, inclusive of seniors, almost all of whom are covered by Medicare.

* Unfortunately, that 9% still represents around 30 million people.

The administration trumpeted the gains, and deservedly so. By any measure, the insurance components of the law are a success story. Those components were never going to be easy to implement, and things faltered famously at the beginning. But HHS righted the ship and, for the most part, made it work.

To be sure, there are still problems, inherent and iatrogenic. For example, about 3 million people dropped out of exchange coverage in 2015, of the 11.7 million who started in January 2015 (a 26% drop-out rate).  Some shifted to coverage elsewhere such as new job or through a spouse. But others rejoined the ranks of the uninsured, the vast majority because they could not afford the premiums.

Also, some 500,000 people had their coverage terminated in 2015 because of problems documenting citizenship and immigration status, and an estimated 1.2 million had their subsidies “adjusted” because they didn’t fully disclose or detail their incomes. Some of these people lost their entire subsidy, causing them to drop coverage.

Such fraud is a serious issue and rules and procedures, going forward, will have to minimize it.

The bigger ongoing worry, however, is the cost of exchange coverage, and insurers’ warnings in recent months that they lost money on their exchange plans in 2014 and/or 2015. Premiums rose an average 7.5% in 2015, with some states experiencing 12% or greater hikes. The concern now is that a larger spike could be coming for coverage year 2017.

The financial rater A.M. Best, for example, in February downgraded its outlook for the health insurance industry this year from “stable” to “negative.” It cited as the main reason losses in the exchanges due to sicker and poorer people enrolling in larger numbers than expected, and loose rules around special enrollments.

People whose life circumstances change (marriage, divorce, loss of employer-based or Medicaid coverage) can enroll at any time during the year, and insurers have complained bitterly about this.

According to an analysis by America’s Health Insurance Plans and the Blue Cross Blue Shield Association, a quarter to a third of all exchange sign-ups are coming through special enrollment periods. The analysis found that those customers racked up 24% more in medical claims during their first three months of coverage in 2014 than their counterparts who signed up during the open-enrollment period. A separate analysis in California found customers who signed up through special enrollment periods in that state in 2015 were 15% to 50% more expensive.

CMS questions those numbers and points out that special enrollment serves a legitimate purpose and helps people in need.  Still, the agency has tightened the rules on special enrollments for 2017. The government will now mandate that special enrollees provide hard documentation of their triggering events, including the birth or adoption of a child, marriage, moving and/or losing employer coverage.

But insurers are still cautious. And some insurance company analysts predict that if 2016 brings losses at the same level as 2015, some insurers will begin to drop out if they cannot raise premiums significantly.

Other analysts say the insurers are posturing and trying to manipulate the exchange marketplace to their ends; namely, higher profits. That manipulation may be working. In late February, CMS released final rules for 2017 exchange plans that weaken proposed rules issued for public comment in November 2015.

For example, CMS had proposed stricter rules for network adequacy (narrow networks) and plan standardization (to make it easier for consumers to compare plans). Both sets of rules were weakened and insurers go into 2017 with just slightly stricter requirements for network adequacy and no mandatory requirement for standardization.

On the plus side, the new rules require that changes in premiums be made much more transparent to enrollees, and that—beginning in 2018, services provided by out-of-network providers in an in-network facility—triggering so-called “surprise medical bills”—go toward the member’s in-network annual cost-sharing limit.

On balance, then, ACA implementation is proceeding about as well as could be expected.  But tough issues remain.  It was called the Affordable Care Act for a reason: to gain political and public support for consumers’ key concern around health insurance and healthcare over the past decade—price and cost. It’s now well known that the ACA included only initial steps towards constraining the growth in medical costs that lead to higher premiums, as well as trying to create a more competitive health insurance marketplace.

Unfortunately, political divisiveness driven by ideological blindness prevents bipartisan collaboration on healthcare costs. If Hillary is elected, the Republicans will have a big decision to make on whether to continue to engage in political theatre or try to solve one of the nation’s nastiest and far-reaching problems. Obviously, if Trump is elected, all bets are off as to what would happen.

Steven Findlay is an independent journalist and editor who covers medicine and healthcare policy and technology.

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6 replies »

  1. I suspect the hope is that Ben Carson will be a major influence on what he would do in health care.

  2. Thanks for the comments, gentlemen. I agree with points made….except, of course, “bring on trumpcare”….which was a point in jest from Anish. As pointed out in several THCB pieces in recent weeks, Mr. T/Blowhard has very idiosyncratic and inconsistent views on healthcare. I have no idea what his supporters are hearing him say on that….does not seem to be their major issue but I’ll wager that millions of them are enrolled in Obamacare.

  3. A big help would be to figure out some way for patients to effectively shop whilst paying down deductibles.

    At the present time all these out-of-pocket payments serve no market-competition-improvement function because they all have to go to the locked-in providers in the patient’s plan. There is no motivation for the patient to search around for other providers with cheaper prices because every provider he is able to interact with is a mamber of his plan and has fixed prices. It is a dead-weight loss to not get some value out of all this oop spending.

    A better way might be to simply not-mandate ambulatory care and only have mandates for national hospital care–with first dollar coverage. People could manage their own ambulatory care in any fashion they desire [with exceptions], and prices would probably plummet.

    Surely all of us can come up with some powerful effective gimmick that would serve as a price-lowering force for the entire sysrem. This defect was the seminal problem in the PPACA. Going back to indemnity might help also–i.e. claim money passing back to patient first. I don’t know….

    We have to think of something here.

  4. Steven, this is very well written! Another reason fundamental ACA elements are likely to remain and expand is because private industry can no longer provide the subsidies once provided in support of care to uninsured and underinsured individuals. The biggest need for consumers and hence the challenge for providers and public health officials is to bring the cost of care down. More needs to be written about the underfunded R&D industry and the underfunded higher education as a means of bringing forth solutions to lower the price of producing new products and licensed caregivers. We don’t do that much more to people in the US healthcare system than found in other developed countries. It just costs a lot more and there are many more reasons for that cost than greedy caregivers, lawyers, and demanding entitled patients.

  5. In real estate:
    Location, location, location.
    Costs, costs, costs.

  6. Couple in my office today – insurance through the ACA. Deductible 6000 dollars. They aren’t happy.. The ACA is not popular…the trump base (notice I didn’t say republican base) I think very much would not mind the ACA to go away. They just want it to be replaced by some magical other program that doesn’t exist :). Bring on trumpcare!!