After a rocky start characterized by rising premiums and dwindling health insurer participation, the Affordable Care Act health insurance exchanges are finally stable five years since they launched.
Premiums in 2019 flattened out after years of steep increases. Health insurers made profits from selling exchange plans, and some that previously pulled out of the marketplace after losing money came crawling back. Enrollment declined this year, but not by nearly as much as some had expected, given actions by Congress and the Trump administration that were predicted to cripple the ACA exchanges.
Even so, coverage remains unaffordable for millions of people with incomes too high to qualify for federal help. And while lower-income people who do receive financial assistance have been insulated from insurers’ premium hikes, a change finalized by the CMS this month to update the way it calculates how much these enrollees are required to contribute toward exchange plan premiums could mean even the subsidized individuals will pay more for coverage in 2020. Experts say this change threatens the newly achieved stability of the exchanges.
“One of the reasons the marketplaces have been so resilient in the face of all of these attacks has been because the subsidized population has been pretty stable,” said Sabrina Corlette, a health insurance expert at Georgetown University. “This proposal would really affect that population and potentially cause more of them to drop their coverage.”
The change floated in January and finalized in the annual rule setting the standards for 2020 exchange plans would lead to net premium increases after tax credits of $181 million per year between 2020 and 2023, causing 70,000 people to drop their coverage, most of whom will become uninsured, according to the federal government’s own analysis.
That’s because the CMS will alter a formula used to determine the annual “premium adjustment percentage,” which is used to set how much a subsidized exchange enrollee must pay toward the benchmark health plan premium each year. The formula also affects the annual maximum out-of-pocket limit on healthcare spending, which impacts people enrolled in individual and employer-sponsored plans.
The change will increase how much subsidy-eligible enrollees must contribute toward premiums while decreasing their tax credits, Katie Keith, a Georgetown University law professor, wrote in Health Affairs.
An analysis by the Center on Budget Policy and Priorities estimated that at least 7.3 million of the nearly 9 million subsidized exchange enrollees will pay higher premiums because they will have smaller tax credits. The maximum out-of-pocket limit will also increase by $200 to $8,150 for an individual and by $400 to $16,300 for a family.
“The end result is likely to be a smaller and sicker pool of folks, and insurers will have to price for that,” Corlette said.
But the CMS is more concerned with reducing federal spending on tax credits. According to the rule, the change will decrease federal spending on premium tax credits by $980 million in 2020 and more than $1 billion the year after.
“While we acknowledge the impact of the decrease in premium tax credits, we believe this is a technical adjustment to reflect premium growth in the entire individual market. Moreover, the benefits due to the decrease in federal expenditures outweigh those concerns and will be ultimately beneficial to taxpayers,” the agency wrote in the rule.
In total, 11.4 million people enrolled in 2019 coverage through the ACA exchanges, down 300,000 from the prior year. The average monthly premium before applying tax credits dipped 1.5% to $612 in HealthCare.gov states. People who received a premium tax credit—87% of HealthCare.gov enrollees—paid an average monthly premium of $87.