Market forces: A look at exchange turmoil before open enrollment 2017

Open enrollment ahead sign

Photo credit: Getty/JimVallee

Open enrollment for Affordable Care Act marketplace plans begins today. For health insurers, consumers and President Barack Obama, whose signature domestic achievement hangs in the balance, the stakes have never been higher.

“We're at a critical time where we have to show that this program works for people if they just see what their options are,” Obama said on a recent call with ACA enrollment volunteers.

In a message to consumers Tuesday, Department of Health and Human Services Secretary Sylvia Mathews Burwell offered even more optimism. “As we sound today’s opening bell, let’s also take stock of the historic gains in coverage we’ve made as a country, and work together to continue that progress,” she said.

Indeed, the ACA has reduced the uninsured rate to a historic low of 8.6 percent, and officials expect another 9 percent gain in enrollment by the end of the signup period.

Even so, events in the past few months have sparked a renewed chorus of doubts about the public exchanges’ sustainability.

Here are some of the major ACA exchange-related developments--and what they might mean for the future of the healthcare reform law’s most visible component.

Insurers head for the exits

When it revised its 2015 earnings expectations last November, UnitedHealth Group became the first major insurer to indicate its mounting financial losses would likely lead it to lessen its exchange participation. CEO Stephen Hemsley confirmed in April that the insurer would remain in “a handful” of states in 2017--which turned out to be just three.

United soon had good company, as Humana confirmed in early August that it will slash its individual commercial offerings considerably. Later that month, Aetna announced it would pare down its exchange participation as well--spurring backlash against CEO Mark Bertolini, who had previously indicated the insurer would stick it out.

Then came the Blues plans, including Blue Cross and Blue Shield of Minnesota, Blue Cross Blue Shield of Nebraska and BlueCross BlueShield of Tennessee. Others payers that have pulled back include Oscar Health and Harken Health.

All those exits, of course, led to worry about dwindling plan competition. Indeed, two different analyses found that more regions than in years past have just one insurer. But Centers for Medicare & Medicaid Services Acting Administrator Andy Slavitt pointed out that concerns about competition may, in fact, be overstated.

Some payers get it right on exchanges

Not all insurers, however, have struggled to find their footing in the public exchange market. Molina notably has bucked the trend by relying on a narrow-network plan design that it has honed in its profitable Medicaid business. Some wonder, though, if taking on sicker enrollees will erode this advantage.

Another successful strategy appears to be offering tiered networks--such plans have become the most popular on the New Jersey exchanges. Horizon Blue Cross Blue Shield, which has faced criticism for its tiered-network Omnia products, nonetheless has made them work, as the payer requested a mere 5 percent premium increase for its tiered exchange plans 2017.

Obama administration officials have praised payers’ efforts at innovating their marketplace plans, with Slavitt noting that much in the way companies like Tesla have adapted when the rules of the game change, successful insurers will embrace the regulatory changes tied to the ACA.

Fears of premium hikes come true

America’s Health Insurance Plans President and CEO Marilyn Tavenner--and health insurers themselves--predicted as far back as April that premiums on ACA exchange plans would increase significantly in 2017, citing greater medical costs and rising drug prices.

Once rates were finalized, HHS confirmed that premiums for the ACA’s benchmark plan would rise an average of 22 percent across states and the state exchanges for which data was available.

Rate increases and decreases also vary considerably by region, and the Obama administration was quick to note that 77 percent of current marketplace customers would be able to purchase coverage for $100 per month or less next year after tax credits are applied.

That did not, however, stop Republican politicians in the homestretch of campaigning from seizing on the news to renew criticism of the ACA--especially in congressional races. Indeed, while many people will be insulated from premium increases, those who don’t receive subsidies will be hit particularly hard--and rising subsidies could also end up costing taxpayers more.

Litigation looms in background

With Supreme Court fights behind the ACA, perhaps the most formidable legal challenge remaining is the House v. Burwell case, in which GOP lawmakers have challenged the legality of cost-sharing subsidies based on the argument that Congress never appropriated funding for them.

The plaintiffs scored a victory in May, when a U.S. District Court judge ruled in their favor--though the Obama administration already filed a brief in its appeal of the ruling. Should the House ultimately prevail, it could destabilize the entire marketplace. Therefore, a clause in this year’s qualified health plan contract seems to give insurers an option of terminating their contract if subsidies are struck down.

Meanwhile, some insurers have sued over the structure of the risk adjustment program, arguing it is unfair to smaller insurers. Others have sued over risk corridor payment shortfalls. The Obama administration argued the risk corridor complaints are baseless and premature in filing to dismiss two such suits, but it also has indicated it would be willing to settle--angering GOP lawmakers.

Enrollment efforts, policy tweaks give consumers a nudge

In response to concerns about consumers losing their plans due to insurer exits, the Obama administration announced that it will automatically enroll those individuals in plans to ensure continuity of coverage--while giving them the option not to keep that plan.

In another policy change, health officials rolled out “Simple Choice” plans--standardized options that health insurers had criticized when the idea was first proposed.

For those remaining uninsured, the administration once again launched an outreach campaign consisting of TV and social media ads. This year it targeted 15 key metro areas that were most likely to see enrollment gains, working with local governments and organizations to spread awareness, and perhaps most notably, set its sights on winning over hard-to-reach millennials.

Obama offers ACA fixes, appeals for collaboration

Recognizing that health insurers had valid complaints about the ACA exchanges, Obama offered a slew of proposed fixes in August, including strengthening proof of eligibility for special enrollment periods, allowing for more creative plan design and restructuring how medical loss ratios are calculated.

In his final months in office, he also took pains to emphasize what the ACA has accomplished--and how he believes it can thrive in the future. Perhaps most notably, he championed the idea of a public option on the exchanges; major provider and payer lobbying groups, though, were not so convinced.

Obama also attempted to reach across the aisle to Republicans who have opposed the ACA, urging them to “put aside all the political rhetoric, all the partisanship, and just be honest about what’s working, what needs fixing and how we fix it.” Perhaps predictably, though, prominent GOP lawmakers, including House Speaker Paul Ryan, doubled down on calls to repeal and replace the law.