Affordable Care Act could take hit from new accounting rules

The next major threat to the Affordable Care Act could come from an unlikely, and seemingly benign, source: New accounting recommendations for state and municipal employee pensions.

The Government Accounting Standards Board recently urged states and municipalities to include retiree healthcare costs in their liability calculations, a move that could ultimately result in making the ACA exchange consumer population older, sicker and more expensive, Quartz reports.

That's because, as a similar situation with private-sector companies in 1990 demonstrated, the new standards may cause state and municipal governments to drop health benefits for their retired workers. After all, these liabilities are extremely expensive--they're estimated to total $1 trillion--and most state and municipal governments have put aside little to cover the costs.

As many of these workers retire before age 65, when they would begin to qualify for Medicare, such a situation would leave a "significant coverage gap to fill," according to the article. For the 9.5 million public pension beneficiaries in the U.S., the average age is around 70, suggesting that there could be enough retirees who don't yet qualify for Medicare to significantly alter the composition of the ACA exchange population.

This, in turn, could lead to higher premiums, notes Quartz, and therefore threaten the ACA's promise to make health insurance more affordable.

Even if such a scenario does not unfold, some research has suggested that exchange customers are already expensive to cover. For instance, public exchange consumers spend an average of $3 more on drugs and medications than commercial members, according to a report released in March, and such customers also are more likely to use pricey specialty drugs.

However, Healthcare.gov CEO Kevin Counihan has said in a letter to state insurance commissioners that exchange plans have recently shown an improved medical loss ratio, arguing that rate increases proposals from insurers may thus warrant scrutiny.   

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