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Continuing bare-bones plans won't cause insurance exchange 'death spiral,' RAND study says



Ever since the online health insurance exchanges went live, insurance executives have been wringing their hands over whether enough younger, healthier individuals will enroll to dilute the risk pool.

Anxiety levels rose even higher after the Obama administration—bending to public pressure—said individuals could keep their bare-bones policies that don't meet the criteria of the Patient Protection and Affordable Care Act.

But, actually, leaving those plans intact (and their members out of the exchanges) doesn't really matter.

At least not according to an analysis from RAND Corp., a not-for-profit research organization, which found that letting individuals keep their plans won't result in the “death spiral” some payers fear.

The RAND researchers relied on a “microsimulation” model to evaluate three scenarios: the current rules that allow individuals to keep their noncompliant policies as long as their state's health insurance commissioner allows it, as well as two proposals in Congress that would allow the plans to continue, with or without the option to enroll new members.

The most detrimental policy move would be to allow new enrollees into noncompliant plans, the study found. It would increase premiums for exchange plans by 10% and decrease enrollment by 3.2 million nationwide.

It also would trigger an additional $5 billion in federal spending on tax credits and subsidies through 2015.

The other moves, though, would have a “far smaller” impact, researchers said. The analysis also pointed out that momentum has stalled around the two congressional proposals.

Some insurance executives appear to be more concerned about the policy changes than others. Humana issued a financial filing warning that more members than it expected are choosing to stay with their current plans, likely creating more adverse risk in its exchange business.

But even if Humana is right that a significant number of consumers are indeed hanging onto bare-bones plans and eschewing the exchanges, there are indications that most of the enrollees in exchange plans are moving from one plan to another and that only a small percentage of them—as few as 11%—were previously uninsured.

A survey from McKinsey & Co., based on a random sampling of 389 exchange enrollees, found that most individuals previously had group or individual coverage. Those findings, according to a Wall Street Journal report, were confirmed by other payers, who said they're seeing the same thing, to varying degrees.

And in public comments at last week's J.P. Morgan Healthcare Conference, several insurance exchanges took regulatory changes and enrollment trends in stride.

Aetna President and CEO Mark Bertolini said exchanges represent a small part of his company's business, but the industry is rapidly moving to a retail market. “I'm not alarmed by those (early exchange) demographics—they're much better than I thought they would be,” he said.

Follow Beth Kutscher on Twitter: @MHbkutscher

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