States Trying to Stabilize ACA Marketplaces

Three states have obtained ACA waivers to launch their own reinsurance programs, and four more such waivers are pending before the Centers for Medicare & Medicaid Services.

July 19—Amid growing policy uncertainty at the federal level, states are undertaking a range of responses to stabilize the individual-insurance marketplaces. But so far, the effect is uncertain.

Maryland has received approval to create a reinsurance program for 2019 through 2023 for its individual market, which faces average 2019 premium increases of 30.2 percent, according to the state’s estimates.

Additionally, the state enacted legislation limiting short-term health plans to three months, with no extensions or renewals. The state also has tightened requirements on association health plans.

“It does offer some premium relief immediately in 2019,” Robert Morrow, associate commissioner of the Maryland Insurance Administration, said at an Alliance for Health Policy briefing for congressional staff. “It’s very hard to look past that right now because that’s the thing that can get us the most relief right now.”

Washington state’s actions include imposing strict limits on short-term health plans and association health plans. The state also is moving to require insurers in state Medicaid programs to offer Affordable Care Act (ACA) marketplace plans in counties without insurers.

Despite those efforts, insurers in the state have requested an average 19 percent premium increase for 2019. That rate would be down from 36 percent in 2018. Final decisions by state regulators will come in mid-September.

The state was unable to implement its own $200 million reinsurance program.

“We may revisit, it but it’s proved very difficult for us,” Mike Kreidler, OD, the state’s insurance commissioner, said at the event.

Another effort to boost ACA marketplace stability was the approval by three states—Massachusetts, New Jersey, and Vermont—to enact state-based individual mandates for 2019. Those efforts followed the federal suspension—starting in 2019—of the tax penalty for lacking health insurance, as required by the ACA. Washington was among states that were unable to implement their own individual mandates.

The state efforts follow the failure of a congressional push to restart what was a temporary reinsurance program created by the ACA, and Trump administration rules to allow association health plans and short-term plans. Insurance company advocates warned those developments could increase premiums by pulling healthy enrollees out of the individual market—both the ACA marketplaces and off-marketplace plans.

In July, the Trump administration halted risk-adjustment payments to ACA marketplace insurers, citing a federal court order in March that questioned the formula by which the payments were calculated. This week, insurer advocates submitted requests for the judge to consider the uncertainty that the finding has injected into the market.

State Reinsurance Plans

Maryland and two other states have obtained ACA waivers to launch their own reinsurance programs, and four more state reinsurance waivers are pending before the Centers for Medicare & Medicaid Services.

Some analysts note that states with reinsurance programs, like Minnesota and Pennsylvania, have had  lower premium increase requests.

The ACA created a three-year reinsurance program because “the idea was we would reach stability” after that, said Brian Webb, assistant director for the National Association of Insurance Commissioners (NAIC).

Webb noted that a congressional effort to pass bipartisan reinsurance legislation “would have been a tremendous help nationwide” but fell apart over partisan divisions. The NAIC-backed effort would have been “a quick and easy way to again give stability so we could move on to the more in-depth changes that are necessary,” he said.

Sabrina Corlette, a research professor at Georgetown University’s Center on Health Insurance Reforms, said creation of state reinsurance programs is “very challenging” because of the cost and the lack of existing infrastructure.

“It can be a very heavy lift at the state level,” Corlette said.

The reinsurance effort has not always broken down along predictable partisan lines. For instance, Wisconsin Gov. Scott Walker, a Republican, launched a state reinsurance program funded with savings from a health insurance tax moratorium on Medicaid managed care plans.

“That was a creative way to use rainy-day funds, if you will, to jump-start the program in the state,” said Jeanette Thornton, a senior vice president for America’s Health Insurance Plans (AHIP).

Effects Expected

The cheaper options supported by the Trump administration are expected to attract individuals who do not receive subsidies in the individual-insurance market.

“It will largely be the unsubsidized healthy folks who will gravitate to these cheaper options,” Corlette said. Families with incomes of 90,000 to $100,000 are above the subsidy threshold.

Additionally, among those with incomes between 300 percent and 400 percent of the federal poverty level, who receive lower subsidies, “many could find that the short-term plans or association plans are a cheaper option,” Corlette said.

Washington’s ACA exchange could see a particularly large impact because 40 percent of its enrollees are unsubsidized—significantly larger than the national average of near 10 percent, Kreidler noted. Eleven insurers are offering 74 individual plans in 2019 in the state, either inside or outside the ACA marketplace.

Some leaders in that state are considering the creation of a “premium wrap,” which would subsidize enrollees who don’t qualify for federal premium subsidies, Kreidler said.

Without that, “more and more of them are going to end up leaving the market,” Kreidler said.

Thornton of AHIP said insurers believe 8 million people who are enrolled in the individual market and 28 million uninsured “are going to be really driven toward these ACA alternatives. That’s going to drive up costs for the people who remain, depending on how healthy they are, if the healthy people leave that market.”

Amid concerns that enrollees in short-term or association plans may be unaware that those plans do not have to comply with ACA coverage requirements, insurance officials said states are looking to educate the public about their limitations.

“We need to be diligent; we need to make sure they know exactly what they are getting,” Morrow said.

Corlette warned that little transparency is available on short-term plans, such as the fact that few states require them to submit annual rates for review.

“So there is not a lot of prompt review of what hits the street and consumers see,” Corlette said. “Time and time again you hear about consumers that get very slick materials that make their plan look like a major medical policy when it is not.”

She cited the example of a policyholder who was sold a series of short-term policies that purportedly covered mammography—but was sent a large bill because the policies did not cover the reading of the imaging.

“So what’s a consumer supposed to do?” Corlette said.

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Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare