Medicare programs offer clues to long-term stability for ACA exchanges

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The initial growing pains experienced by two Medicare programs could offer valuable insight for legislators and policymakers looking to stabilize the Affordable Care Act marketplace, according to a report by the Robert Wood Johnson Foundation.

Several early struggles within the Medicare Advantage and Medicare Part D programs align closely with the ACA’s current concerns surrounding enrollment and financial instability. Drawing on subsequent changes to each program that led to long term stability, researchers highlighted several ways legislators could apply similar changes to the ACA exchanges:

  • Increase tax credits: In 2003, after several high profile insurers exited the Medicare Advantage market, Congress reeled insurers back by adjusting payments. Although the same model is less realistic with ACA exchanges, researchers say higher tax credits for ACA enrollees would attract healthier individuals, giving insurers some incentive to return.
  • Use the public option as a fallback plan: Although it’s never been used, legislators included a “fallback plan” within Medicare Part D in areas where there was low competition. The report says the public option—a policy that has resurfaced in the build-up to the presidential election—would allow the government to step in with a plan when insurers pull out of certain exchanges.
  • Ease barriers for market entry: Legislators eased the burden of insurers entering the MA marketplace by allowing them to pay non-contracted providers Medicare rates as they built a more robust network. By offering a “longer-term path to meeting network adequacy requirements,” insurers in the ACA exchanges would have the ability to grow their membership over a period of time, putting them in a better position establish a robust network.
  • Extend reinsurance: Risk adjustment, reinsurance, and risk corridors are all permanent fixtures of Medicare Part D. Extending the reinsurance program for ACA plans, which is set to expire this year, would help stabilize the marketplace.  
  • Auto-enroll beneficiaries: Automatically switching ACA enrollees to a lower-cost plan would mitigate volatility within the marketplace.

Aetna’s announcement that it will pull back its marketplace offerings, coupled with second quarter ACA plan losses for the five biggest insurers has renewed discussions about the long term viability of the state exchanges.

- read the Robert Wood Johnson report