If four key steps are taken to stabilize the Affordable Care Act marketplaces, the combined effect could increase enrollment by 2 million and reduce average premiums by 20%, according to a new analysis.
Researchers from Oliver Wyman, the consulting firm that conducted the analysis (PDF), estimated that rising individual market premiums will cost consumers and the federal government roughly $15 billion per year from 2018 to 2020. That cost burden could prevent some individuals from purchasing coverage—likely the youngest and healthiest—thus further destabilizing the risk pool.
To prevent such a scenario, policymakers are considering multiple market stabilization tactics. In fact, the Senate Health, Education, Labor and Pensions Committee is planning to hold a series of hearings on that subject in September. Topics under consideration include ensuring funding for cost-sharing reduction payments, and in a nod to the GOP, giving states more flexibility to remake their individual markets via the ACA’s 1332 waivers.
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For their part, the Oliver Wyman researchers rank the continuation of CSR payments as one of the four most important stabilization measures for policymakers to consider. The Congressional Budget Office has estimated that stopping CSR funding would raise silver-plan premiums an average 20% in 2018 and raise the federal deficit by $194 billion from 2017 through 2026.
The other steps that the report highlights are:
- Strong enforcement of the individual mandate: Though the Internal Revenue Service has indicated it is still enforcing the mandate, the agency is also processing tax returns in which taxpayers do not indicate their health coverage status. Oliver Wyman’s modeling shows that lax enforcement of the individual mandate could reduce the individual enrollment to below 14 million in 2018.
- An extended moratorium on the health insurance tax: As a previous Oliver Wyman report found, the scheduled reinstatement of the HIT is expected to increase premiums by nearly 3% 2018. Continuing the moratorium, on the other hand, “would help reduce the significant premium increases and provide more stability to the individual ACA market,” the report stated.
- A permanent external funding mechanism to help lower premiums: A program similar to the ACA’s temporary reinsurance program would help mitigate premium increases and bring more nonsubsidized individuals and young, healthy enrollees into the individual market, the firm said. In addition, a significant portion of the estimated cost of the external funding—$15 billion per year—would be offset by a decline in federal spending on premium subsidies.
Policymakers who are looking to stabilize the individual markets face a tight timeline in which to make it happen. Insurers have until Sept. 27 to make their final decisions about whether they will participate in the ACA marketplaces in 2018. There are currently no U.S. counties that lack an exchange insurer next year—a far cry from what was the case in recent months—but that could change if steps aren’t taken to stabilize the individual markets.