The Affordable Care Act’s (ACA's) insurance exchanges are the most stable they have been in years, but questions remain on whether the market’s enrollment can grow.
Open enrollment for the 2020 coverage year starts Nov. 1 and runs through Dec. 15, and premiums for the benchmark plans on the federally run HealthCare.gov are expected to decline by about 4%. Experts say that while enrollment growth appears to have plateaued, there are areas that could lead to more customers.
“It is not a growing market,” said Chris Sloan, associate principal for the consulting firm Avalere. “Don’t expect the core group of beneficiaries to change in the coming years.”
The main reason for the lack of growth is the high premiums for the unsubsidized population on the exchanges.
As of March 2019, there were 10.6 million customers on federal and state-based exchanges, and 87% of those got a tax credit to lower costs, according to a Centers for Medicare & Medicaid Services report.
The unsubsidized population has steadily declined on the exchanges rapidly over the past several years. From 2016 to 2018, the unsubsidized population declined by 40% as 2.5 million unsubsidized customers fled.
The biggest headwind for growth on the exchanges is still “affordability for unsubsidized people,” said Katherine Hempstead, senior policy advisor for the Robert Wood Johnson Foundation. “The plans are so expensive."
It also remains unclear what can be done to reverse the affordability issue with unsubsidized customers.
“There will have to be a fundamental policy change to that market to fix that dynamic,” Sloan said.
But experts were optimistic about areas that could spur some growth.
Chief among them is a rule the Trump administration finalized back in June to expand the use of health reimbursement arrangements (HRAs). The rule would reconfigure Obama-era regulations that would limit the use of HRAs starting in January 2020.
The new rule could lead to more employers subsidizing their workers to get an exchange plan.
“The attraction for an employer is they can give you a fixed amount of money and raise it every year and say go buy insurance,” Sloan said. “That is the attraction for the employer and for the employee: It is an HRA, so it is tax-exempt.”
However, individual market coverage usually has higher cost-sharing than an employer-sponsored plan, so some employees can lose out, he added.
“Nobody knows whether or not that is going to be a big deal. But that could be a consequential source of growth for the individual market,” Hempstead said.
Insurers should also keep an eye on several state initiatives aimed at lowering the cost of insurance.
Chief among them is a new law in California that would raise the income eligibility for getting subsidies from 400% above the federal poverty level (FPL) to 600% above the FPL starting next year.
States are also exploring waivers to set up reinsurance programs and to create their own insurance exchanges.
“I think that some of the states are really stepping up to play a more active role,” Hempstead said. “Nevada has a state exchange, and New Jersey and Pennsylvania are applying. The business case is a lot stronger because the technology is pretty matter of fact and a lot less expensive. You can administer the marketplace and beat the rate that you have to pay the federal government, so it makes sense.”
Insurers could also see the marketplace as a strategy to increase their business in other segments, such as Medicare Advantage (MA).
“The ACA marketplace, there is a lot of older adults in that marketplace,” Hempstead said. Insurers that may think they are in MA could go into the exchanges “and acquire some customers and keep them into MA.”
But with the ACA, there is always the chance for political volatility. There is a case working its way through the courts called Texas v. Azar that would dismantle the entire ACA, and if President Donald Trump wins reelection and Republicans retake the House in 2020, they could try again to repeal the law.
Volatility, however, has become the norm for the exchanges, and insurers appear to be used to it, Sloan said.
“We’ve been through this multiple times,” he said. “Insurers will price in volatility and that has been the case for multiple years.”