Republican lawmakers’ efforts to repeal the Affordable Care Act would upend state’s’ individual health insurance markets even as they have started to stabilize and become more sustainable, according to a Center on Budget and Policy Priorities analysis.
Congressional Republicans bent on repeal have tried to dismiss this danger, in part by claiming that these markets are already near collapse, CBPP said.
But, the evidence shows that the individual market is becoming more stable, not less. In contrast, repeal would set up the perfect conditions for a death spiral. The evidence shows that the individual market is becoming more stable, not less. In contrast, repeal would set up the perfect conditions for a death spiral, the report said.
The main symptom of a death spiral is rapidly falling enrollment. A death spiral occurs when healthier people leave the pool with health coverage, pushing up premiums for remaining enrollees, who cost more to cover. The higher premiums then cause more people to leave the pool, raising premiums still higher. This cycle can continue until few people are left and the market is near collapse, the report said.
But enrollment in the individual market (which includes plans inside and outside the ACA marketplaces) has grown each year since the ACA’s major coverage expansions and reforms took full effect in 2014, from about 11 million people in 2013 to about 18 million as of early 2016. For the 2017 plan year, where open enrollment continues through January, marketplace enrollment is tracking higher than last year, the report said.
Dramatic premium increases could also signal a death spiral, but only if they cause people — specifically, healthier people — not to enroll. That doesn’t appear to be happening in the marketplaces, the report said. States with larger premium increases in 2015 had similar enrollment growth as states with smaller increases, a new report by the White House Council of Economic Advisers (CEA). Nor is there evidence that premium increases caused healthier people to leave the individual market during this period. The report found that states with larger premium increases had slower growth in the insurer-reported costs of covering ACA plan enrollees, which suggests that the pool of people with coverage in these states is getting healthier, not sicker, the report said.
Even in states with some of the largest premium increases, enrollment appears to be on track. For example, Arizona had by far the highest benchmark premium increase in 2017 but has seen plan selections rise by about 8% as of late December, compared to the same point last year. Oklahoma, too, had significant premium increases but plan selections are up about 9% so far, the report said.
ACA premium credits protect against a death spiral in the marketplaces by capping the premiums modest-income people pay at a set percentage of their income, insulating them from premium increases. The credit grows with the cost of the benchmark plan, which not only helps people afford coverage but also holds premiums down for healthier people who may not use much medical care, making it more likely they will enroll, the report said.
Premium increases are concerning, particularly because they make coverage less affordable for people who don’t get subsidies, which can affect the risk pool over time, the report said. But it appears that was a one-time correction. Many insurers in the individual market simply priced too low in the initial years after the ACA took effect. Some did so inadvertently, because they couldn’t be sure who would sign up for their plans and how much they would cost to cover. Other insurers set prices low deliberately, to attract new customers. Since then, many insurers have needed to raise premiums significantly to cover their costs and also to address the phase-out of the ACA’s temporary reinsurance program, the report said.
As the Urban Institute noted, repeal would begin to immediately unravel the individual market. Eliminating the individual mandate would cause 4.3 million people to drop their coverage in 2017, and many of them would be healthier. That would cause significant financial losses for insurers which would lead them to either pull out of the market for the following year or raise premiums significantly.
Info: https://goo.gl/XRqDHe (report).