The hand-wringing over insurer pullouts and premium spikes in the Affordable Care Act exchanges is growing frantic since Aetna announced last week it would exit from the marketplaces in 11 of the 15 states where it currently sells plans. UnitedHealthcare and Humana previously had retreated from the exchanges, and others including some Blue Cross and Blue Shield companies say they're bleeding red ink on their exchange business.
Everyone is scrambling for solutions, with liberals urging more regulation and conservatives less. Earlier this week, the prominent health economist Henry Aaron of the Brookings Institution offered what he called “simple way” to reduce the risk of more insurers leaping off the exchange ship.
“Make the Obamacare exchange one big marketplace for everyone buying individual health insurance coverage,” he wrote in an op-ed piece in the Washington Post. “Nationwide, this would merge the 12 million people who get their insurance through Obamacare with the roughly 9 million who buy their policies outside the exchanges.”
It's an approach that insurers almost certainly would fight. But it's something that state leaders around the country might consider because they could do it on their own without waiting for a deadlocked federal government to act. And it's in line with other proposals to tie insurers' participation in more lucrative lines of government business to selling products on the exchanges.
Washington, D.C., and Vermont already have merged their exchange and off-exchange markets for individual plans, and D.C. is in the process of requiring that all small-group products also be sold through the exchange. Both jurisdictions passed laws allowing the combination of these markets, and legislation would be necessary in other states as well. The federal government probably couldn't do this on the federally run exchange without enabling legislation from Congress, which Republicans are unlikely to approve.
Aaron, who serves as vice chair of the D.C. Health Benefit Exchange Authority, argues that requiring all individual-market plans to be sold through the exchanges would bring millions of healthier, more affluent people into exchange plans. In D.C.'s exchange, only about 8% of enrollees qualify for income-based premium subsidies, compared with 85% of exchange enrollees nationally. “Merging the relatively healthy individuals who now buy coverage outside the exchanges with those using Obamacare would help stabilize insurance for the whole group,” he wrote.
He also thinks this would pressure insurers to stay in the exchanges, because under federal law any carrier that leaves a state entirely cannot re-enter that state's market for five years. Even though Aetna is departing from some state exchanges, it's planning to continue selling individual-market plans off the exchange in most of those states. Under Aaron's plan, insurers wouldn't be able to do that. Exiting a state's exchange would be an all-or-nothing decision.
“If the federal exchange and all of the other state exchanges were to adopt the 'one big marketplace' rule, the risk that insurers such as Aetna and UnitedHealth would selectively abandon customers in Obamacare exchanges would evaporate,” Aaron wrote.
“It would force insurers to make a harder choice: Do I leave the state's individual market for five years, or keep some presence if the market improves?” agreed Tim Jost, an emeritus law professor at Washington and Lee University who follows the ACA closely.
But combining the exchange and off-exchange markets across the country undoubtedly would face fierce opposition from insurers and possibly from consumers who currently buy off-exchange plans. “If you made the exchange the only market, carriers would choose to leave the individual market entirely, without other actions to address their concerns,” said Elizabeth Carpenter, a senior vice president at Avalere Health.
Beyond that, some experts say requiring that all individual plans be sold through the exchanges wouldn't help to stabilize the exchange risk pool because premiums in all states already are based on a single consolidated risk pool across the exchange and off-exchange markets.
A spokeswoman for America's Health Insurance Plans said Aaron's proposal “would not address the problems in the market which impact both on-and off-exchange consumers,” and that AHIP instead is focused on “the substantial challenges in the market related to special enrollment periods, third-party payments and repeal of the health insurance tax.”
Another problem with Aaron's proposal is that the composition of the off-exchange market remains a mystery. There's a glaring lack of data about how the off-exchange customer risk pool compares with the exchange market, how benefits compare, and whether insurers are doing better financially off the exchanges. “Different carriers say the problems in the off-exchange market are not that different from on the exchange,” said Katherine Hempstead, a senior program officer at the Robert Wood Johnson Foundation. “I don't think it's a cure-all.”
Even if it didn't fix the exchanges' risk pool problems, Hempstead and other experts argue that combining the markets would be helpful to consumers in terms of making it easier to shop and compare premiums, benefits and provider networks across all available individual-market products.
“There are strong public policy reasons why our approach could work in other states,” said Mila Kofman, executive director of the D.C. exchange, which merged the two markets from the start. “If you set up an environment where customers get to compare all prices and products in one place, that creates true competition and means better prices, and it can actually reward insurers that provide the best products.”
No one knows for sure why some insurers prefer to sell plans outside the exchanges, or why millions of consumers choose to buy there. Jost speculates that insurers tweak their benefit packages in off-exchange plans to appeal to healthier people, and he thinks it simply may be logistically easier for people who don't qualify for premium tax credits to buy plans directly from insurers or through brokers outside the exchanges.
Aaron guesses that some carriers prefer selling outside the exchanges because it's harder for customers to directly compare their prices and products with those of competing insurers. “They don't want to expose their customers to competitors,” he said. But if the states merged the exchange and non-exchange markets, “people would end up getting better service down the road,” he said in an interview.
Meanwhile, conservative health policy experts are offering a sharply different set of ideas for fixing the exchange problems. One of the most common conservative proposals is relaxing the so-called age band for rate setting, and letting insurers charge their oldest enrollees five times or seven times as much as their youngest enrollees—rather than the current ACA limit of three times as much.
Dr. Avik Roy, who served as a policy adviser to Republican presidential candidate Marco Rubio, said in a Washington Post op-ed this week that the law's 3-1 age band drives premiums up 75% for 19-year-olds, who consume one-sixth the healthcare that 64-year-olds use. “Repealing that provision would do more than any other single measure to bring young people back into the ACA exchanges,” he wrote. “Without the young, Obamacare will continue to unravel.”
But Jost said widening the age band would make coverage much more expensive for older people, perhaps causing them to drop coverage, while doing little to shrink premiums for younger people—many of whom already are eligible for Medicaid or generous premium subsidies. “Lowering premiums for young people would have much less impact in terms of getting them enrolled than it would in making insurance less affordable for older people,” he said.
So, the debate over fixing the Affordable Care Act continues. Unfortunately, there is no “simple way” to do anything in health policy.