A new report shows major health insurers are discouraging brokers from selling higher-value gold plans favored by sicker consumers. That signals growing pressure to move away from the Affordable Care Act's reformed insurance market to the pre-ACA practice of selecting customers based on health risk.
This development could bolster Democratic presidential candidate Bernie Sanders' argument to abolish private insurance and switch to a government single-payer insurance system. Many Democrats have been skeptical about preserving a role for profit-oriented insurers under Obamacare, demanding at least a public insurance option.
Kaiser Health News reported Thursday that Cigna Corp. and Humana have stopped paying brokers to sell gold plans to individuals and families while continuing to pay commissions on lower-benefit, higher-profit bronze plans. Experts say it's generally people with pre-existing healthcare conditions who buy gold plans with lower deductibles and copayments because they know they'll need care and want to keep their out-of-pocket costs down.
In addition, Aetna, Anthem and Cigna reportedly have told brokers they will stop paying them commissions for signing up customers who qualify for coverage outside of the three-month open enrollment window due to changes in their life circumstances. The CMS implicitly acknowledged that some consumers have abused these special enrollment rules when it recently eliminated six of the 30 special enrollment categories.
Of the country's seven largest insurers, only Kaiser Permanente and Health Care Service Corp., which operates Blue Cross and Blue Shield plans in five states, have not changed their commission payment structures recently for gold plans or special enrollment, KHN reported.
The insurers said these moves represent market adjustments to deal with the higher-than-anticipated medical claims in their ACA exchange business. They also were responding to congressional Republicans' defunding of the ACA “risk corridor” program to compensate health plans that sign up sicker populations.
Regulators in Colorado and Kentucky have told insurers that changing broker commissions violates fair-marketing rules. And federal regulations bar insurers from employing marketing practices that discourage the enrollment of people with significant health needs.
UnitedHealthcare has reported significant losses on its exchange business and says it's considering exiting the exchanges in 2017. Aetna also has said it lost money on its exchange business last year, though it has not threatened to abandon that line of business.
Both companies blame their losses at least partly on consumers using the special enrollment categories to sign up for coverage after getting sick. Many insurers say the Obama administration needs to take further steps to make the exchange markets more actuarially viable. The increased enrollment for 2016, to 12.7 million as of Feb. 1, may help.
“Private health insurance markets in general invite gaming by both the insured and the insurers,” Princeton University health economist Uwe Reinhardt said in an interview with Modern Healthcare.
But Reinhardt and other pro-ACA policy experts argue that these moves to discourage brokers from selling gold plans represent discrimination against sicker people and a return to the old insurance industry practice of making money by cherry-picking healthier customers. And it runs counter to the central, highly popular provision of the ACA prohibiting insurers from denying coverage based on health status.
Still, risk selection is how health insurers operated profitably for decades prior to the ACA, and they have well-developed skills in that area. In contrast, they're still learning how to work with providers to keep patients healthier and reduce wasteful medical services. “There is a general temptation to cherry-pick. It's always there,” Reinhardt said. “If you had a single-payer system, you wouldn't have these problems.”
Wendell Potter, the former public relations head of Cigna and now a critic of the health insurance industry, told Modern Healthcare recently that for-profit insurers in particular want to regain their ability “to sell junk insurance” with minimal benefits because those types of plans were extremely lucrative and pleased investors.
Congressional Republicans, GOP presidential candidates and many conservative health policy experts also favor loosening or abolishing ACA market rules to allow insurers to sell skimpier benefit packages, give them more leeway to charge older and sicker consumers higher premiums, and let them deny coverage entirely if consumers let their coverage lapse. That would be the result of repealing the ACA's guaranteed coverage rules and letting insurers sell plans across state lines, as Texas Sen. Ted Cruz proposes.
In contrast, Democrats favor maintaining or toughening insurance market rules, including standardizing benefits among exchange plans to make it easier for consumers to comparison shop. Aetna and other insurers strongly oppose standardization.
The November elections may well determine whether health insurers play by the new or old rules.