ACA enrollment could drop 10% from association plan change

Obamacare exchange enrollment could drop up to 10% as people turn to cheaper association health plans for their insurance coverage, according to a new study Friday.

Association plans' ultimate effect will depend on how the U.S. Department of Labor finalizes and implements its proposed rule, but in both cases the people exiting the exchanges are likely to be far healthier than those who stay.

The projected drop could be anywhere from 3% nationwide to 10% of the exchange enrollees from the individual market, according to insurance experts for The Actuary magazine. Their analysis looked at two scenarios of how the regulation could influence the number of healthy people who might leave the individual market to find coverage through an association health plan (AHP).

In the lower estimate, analysts project a 1.4% average increase in claims for Obamacare insurers; the high estimate sparked a 4.4% average increase in claims. Individual market premiums would also go up.

The lower 3% projected drop in Obamacare enrollment assumed that self-employed individuals can opt for AHPs, but that they would be subject to strict verification requirements established by the Department of Labor. An estimated 24% of the Obamacare individual market is made up of self-employed workers, even though only about 10% of people nationwide count as self-employed according to 2015 data.

This estimate also assumed that the final rule keeps the proposed nondiscrimination proposal that AHPs can't exclude an enrollee based on health status — although they could set rates based on aspects of an enrollee's employment, such as geography, date of hire, occupation and industry; or age, marital status and gender. The final rule could leave out this provision.

Ultimately, this scenario projected that AHPs would retain a relatively modest role in the overall insurance market.

The higher scenario of a 10% nationwide drop in individual market enrollment assumed that the Department of Labor drops its nondiscrimination provision from the final rule and preempts some state regulatory authority — which many states and insurance companies strongly oppose. It also assumed that the final rule includes weak vetting at best of an enrollee's self-employed status and that AHPs play aggressively in the market.

In both the low and high scenario, the analysts say that the people leaving the individual market would be much healthier than those staying.

While the analysis focused on nationwide data rather than a breakdown of individual states, whose regulations and market conditions vary considerably, the projections aligned with insurance commissioners' concerns about how AHPs could impact their states.

In a comment letter on the proposed rule, Colorado's commissioner Michael Conway worried whether AHPs could undercut the broader insurance markets and "increase health insurance premiums over the long term for consumers that need or want comprehensive coverage."

"At some point in our lives, that is likely to be all of us," Conway said.

Conway urged the Department of Labor to allow states to keep their broad regulatory authority, citing his state's 1983 regulation that cracked down on AHPs due to "high incidences of fraud and instability" and the consumer harm they caused. Conway also cited concerns about the financial solvency of AHPs, which he said could spill out into financial problems for providers as well.

Only a few AHPs remain in the state now, according to a spokesperson for the department.

After the Affordable Care Act tightened consumer protections through regulations, many AHPs vanished nationwide, although some— notably the Tennessee Farm Bureau— remain robust players even though they don't sell plans that comply with the Affordable Care Act's coverage requirements.

Iowa last month passed a law to allow the Iowa Farm Bureau to partner with Wellmark Blue Cross and Blue Shield to start selling non-ACA compliant plans. More than half of individual market plans in the state already don't comply with the Obamacare regulations as they were grandfathered in from the pre-ACA era.