Insurers need certainty. But underwriters of the beleaguered individual market survived months of Trump administration threats to cut off cost-sharing reduction payments and adjusted their premiums accordingly. In fact, they ultimately beat the government at its own game.
The administration will end up shelling out much higher premium tax credits for subsidized enrollees in the individual market because most states instructed insurers to add the cost of CSRs to their benchmark silver plans. Subsidies are calculated based on the cost of these plans.
Some insurers may come out ahead under the ACA's risk-adjustment program. CMS data show that the government owes insurers $12.3 billion in risk-corridor payments to cover losses they incurred on the ACA exchanges from 2014 to 2016. The tab for 2016 alone is nearly $4 billion, according to a Modern Healthcare analysis of the data.
The program was set up to offset insurer losses during the first three years of the insurance exchanges. It was intended to discourage insurers from raising premiums because of uncertainty over who would sign up for coverage.
In 2014, however, a law was enacted making any risk-corridor payments revenue-neutral, which affected how much the CMS could pay out. In turn, insurers have filed 36 different lawsuits against the government to recoup the money. Most of the cases until now have been dismissed as judges gave the executive branch the benefit of the doubt and said that maybe more payments would come.
Now that's no longer the case. In addition, said Mike Adelberg, principal at Faegre Baker Daniels and a former CMS official, the guidance that exists on risk corridors may be interpreted in carriers' favor since the full set regulatory and operational instruction doesn't fully support the argument that the payments in totality be budget-neutral. Moreover, Adelberg said, the Trump administration has been largely silent on the subject. So insurers have good reason to expect the money they were promised when they joined the ACA exchanges.
Of course, nothing is certain in Washington these days. As Congress proved last year, even mandatory appropriations are hard to come by.
Nonetheless, the facts that insurers have proven their ability to adapt and the overall uncertainty that dominated 2017 has waned give Hema Singh of Standard & Poor's reason to believe that insurers have a stable financial outlook.
This isn't to say the individual market itself is what it was designed to be. The dream of a single risk pool in which the healthy people underwrite the sick is largely over, at least for now, healthcare experts and analysts say.
Timothy Jost said President Trump's executive orders to expand short-duration plans and association health plans, as they take effect, will likely draw healthy, young people out of the market and the trend will carry nationwide.
"There are states like California where things are doing relatively well," said Jost, emeritus health law professor at the Washington and Lee University School of Law. But as states receive regulatory permission to change the rules and siphon healthy people off into short-term plans, the risk pools will split and the individual market could begin to look more like a higher-end Medicaid program with heavily subsidized private plans mostly serving lower-income people and people with pre-existing conditions who don't have employer-sponsored coverage.
So ultimately, if Congress doesn't fund CSRs, the shakeout could end with the individual market looking like a second tier of Medicaid, subsidized with generous premium tax credits that will cost more than anticipated by the ACA.
A caveat to this prediction: Centene, with origins in Medicaid managed care, has figured out how to make the exchanges work by harnessing its Medicaid networks. But the company has come under scrutiny in Washington state where patient advocates found the carrier's provider networks were less than adequate. Determining what a provider network should look like could be the next battlefront.
Off the exchanges, insurers like Aetna and UnitedHealthcare are gunning to package short-term, limited-duration plans and so-called self-insured plans for the small-group market that essentially siphons off good risk with young and healthy employees. Researchers with Georgetown's Center on Insurance Reforms noted this trend over the summer. In states where these self-insured plans took off, the small groups saw double-digit premium spikes.
Add to that impending delays to the ACA's health insurance tax and Cadillac tax and big insurers look bullish.