On Friday, actuaries across the country will offer proposed solutions via Twitter to the problems facing the Affordable Care Act exchanges. It's the start of a competition sponsored by the Robert Wood Johnson Foundation and Milliman to develop ideas for improving the performance of the nation's struggling individual insurance market.
It's a creative response to the widely reported challenges facing the federal and state exchanges. Politicians and pundits bemoan the sharply higher premiums for 2017; the reduced plan choice in many markets; the losses experienced by some insurers, with some exiting the exchange market; and the reluctance of younger, healthier consumers to sign up for coverage. Some warn that the ACA's individual market could be heading toward a dreaded “death spiral,” with healthier people driven away by higher premiums and rates skyrocketing as mainly sicker people stay in the pool.
Ordinary Americans read the dire media accounts and wonder whether the ACA will survive. Even the law's strongest supporters, including President Barack Obama and Democratic presidential nominee Hillary Clinton, agree fixes are needed.
Actually, health policy experts say there are relatively straightforward changes that would strengthen the individual insurance market. The key is getting a larger number of younger, healthier people to enroll to offset the medical costs associated with older, sicker plan members. Experts say this could be done through toughening the mandate to buy insurance; boosting premium and cost-sharing subsidies; restoring risk protections for insurers; letting health plans charge younger people lower rates; beefing up enrollment outreach and education; and prodding people to leave their employer health plans and get covered instead through the individual market.
“There is broad consensus among experts about several steps that would help stabilize the market,” said Larry Levitt, a senior vice president at the Kaiser Family Foundation. “I'm quite confident that from a technical standpoint these problems are solvable."
“I do not think the exchanges are in a death spiral,” Marilyn Tavenner, CEO of America's Health Insurance Plans and Obama's former CMS administrator, recently told Morning Consult. “I do think they're unstable, and we have a responsibility to stabilize them.”
The big problem, however, is getting Congress to approve these changes after the election. Most Republicans are ideologically opposed to the goals and methods of the ACA, while Democrats may balk because some of these ideas won't be popular with their base.
Nevertheless, apart from politics, there's substantial agreement about the shape of the technical fixes. “There are things we know we can do,” said Craig Garthwaite, an assistant professor of business strategy at Northwestern University who studies the health insurance industry. “I'm not certain they will solve the problems in the exchanges, but they will be directionally the right thing to do.”
Strengthening the ACA's requirement to buy coverage would be the most direct, effective way to get more healthy people to sign up, though it probably wouldn't be popular, experts say. Garthwaite said the tax penalty for not obtaining coverage needs to be larger and more immediate. It also should be harder, he added, to sign up outside the annual open-enrollment period through so-called special-enrollment periods, which insurers say tend to bring in sicker people. The Obama administration has taken steps to tighten special enrollment, but insurers say more needs to be done.
In response to the problem of people dropping coverage after receiving expensive medical services they needed, insurers have proposed requiring them to pay any outstanding premiums for the remainder of the year before they can sign up in the following open-enrollment period. Another approach would be imposing a benefits waiting period for people who do not maintain continuous coverage.
Strengthening the mandate to get broad participation of younger and healthier consumers is what actuaries consider “the game-changer,” said Joel Ario, managing director of Manatt Health Solutions and a former CMS official in the Obama administration.
Joe Antos, a health policy expert at the conservative-leaning American Enterprise Institute, said one obvious way to get lots more young people into the exchange pool would be to eliminate the ACA provision allowing parents to keep their adult children on their health plans until age 26. It's estimated that 3 million Americans aged 18 to 26 currently receive coverage through this provision.
“They are the youngest, healthiest people and that would go a long way to creating an overall risk pool that looks more normal,” Antos said. “No one wants to do this because of the middle-class politics, but it would absolutely work.”
There's general agreement that broader subsidies to make coverage and care more affordable would boost enrollment. Hillary Clinton has proposed a package of increased subsidies, including a tax credit of up to $5,000 per family to offset the cost of out-of-pocket spending exceeding 5% of income, regardless of household income level. The goal is to offer additional help to middle-class Americans who currently qualify for little if any ACA financial assistance.
The RAND Corp. estimates Clinton's proposal would increase the number of people covered by 9.1 million and would cost about $90 billion in 2018 alone.
Clinton could sharply cut the price tag by limiting the credit to people with incomes up to 400% of the federal poverty level and to those without employer coverage.
“Everyone would agree that if you increase subsidies, that will stabilize the program,” Ario said.
Many experts agree with the insurance industry that it would be helpful to extend and improve the ACA's three premium-stabilization programs—risk corridors, reinsurance and risk adjustment—the first two of which phase out this year. These programs offer financial protections to insurers that enroll a disproportionate share of high-cost members. Some states are moving to establish their own reinsurance programs.
Garthwaite and others also would like to see the federal government revise tax and other policies to encourage people in employer health plans to shift to the exchange market, though that may have to wait until employers gain more confidence in the exchange market. That could add millions of generally healthier enrollees with somewhat higher incomes to the exchange risk pool.
“A lot of people, particularly low-income employees, would be better off in the marketplaces if their employers just gave them money instead of providing coverage,” he said.
There's widespread skepticism about whether Democratic proposals to establish public health plan options to compete with private plans would strengthen the exchanges. But there's some support among experts for Obama and Clinton's idea of offering a Medicare-like option to people in their 50s and 60s, particularly in markets where private insurers aren't selling plans.
There's stronger expert support for allowing insurers to charge older enrollees premiums four or five times higher than those charged to younger members, up from the ACA's current age-band limit of 3-1. It's thought that would reduce rates for younger people and persuade more of them to buy insurance—though it also could force older enrollees to drop coverage due to the higher price.
Alternatively, conservative analysts argue that insurers should be allowed to sell cheaper plans that don't include all of the ACA's currently required minimum benefits. “Let's make it possible for insurers to offer plans that people actually want to buy,” Antos said.
Liberal analysts say that model might well draw younger, healthier people into the exchange pool, but at the expense of making insurance more expensive for older people.
That disagreement highlights that there are two disparate views about the best way to stabilize the market, Levitt said. One is to get more healthy people enrolled to balance out the people who are sick. The other is to make it harder or more expensive for sick people to enroll, or to provide less generous coverage. The first approach covers more people with richer benefits at a higher cost, while the second model reduces costs for the majority of people who are healthy, provides leaner benefits and lowers federal spending.
“That's why the fixes aren't just a technical issue,” Levitt said. “While both approaches could work, which you prefer depends on your values.”
Antos more or less agreed. “People know what we ought to be doing, but it's very hard even for those with expertise to get over their political views,” he said.