Noncompliant plans to have limited impact on reform marketplaces

Though proposed fixes for the problem of insurance plan cancellations will have slight to moderate effects on premiums, enrollment and federal spending, they won't lead to a "death spiral or implosion" of the Affordable Care Act marketplaces, according to results of a RAND Corporation study released Tuesday.

The study analyzed the impact of three options to help Americans keep noncompliant health insurance. The first was President Barack Obama's administrative fix, allowing state regulators to reinstate canceled plans temporarily. The other solutions are now stalled in Congress, The Washington Post reported. Rep. Fred Upton (R-Mich.) proposed a bill to allow anyone, not only current enrollees, to buy non-ACA-compliant plans. Sen. Mary Landrieu (D-La.) introduced legislation requiring payers to offer noncompliant plans indefinitely while limiting future enrollment in them to current policyholders.

RAND predicted ACA-complaint plan premiums next year will rise anywhere from 1 percent under the President's proposal to as much as 10 percent under the others. Enrollment will fall about 4 percent under Obama's fix, while the optional extension plus buy-in proposal would lead to loss of 3.2 million enrollees.

While RAND predicts the number of uninsured Americans will fall between 260,000 and 2.5 million under the proposed fixes, the higher number isn't all good news since "the noncompliant plans will have a significantly lower actuarial value than plans offered in the ACA-compliant market and provide more limited coverage," the study noted.

The study also found Upton's proposal would cause a $5.2 billion increase in 2015 federal spending.

RAND's analysis confirmed early reports that ACA enrollees are older and less healthy, while noncomplaint plans attract young adults. But even young enrollees present challenges for payers and the marketplaces: There's suspicion that 18- to 34-year-old exchange plan enrollees may be the least healthy in their age group, or they may enroll due to anticipated medical expenses such as maternity care in the near future, according to a Moody's Investors Service analysis. This could create downward earnings pressure in 2014 and upward pressure for premiums next year.

For more:
- read the RAND study announcement and results
- here's the Washington Post article
- see the Moody's Investors Service report (.pdf)